Correlation Between ProShares Ultra and ProShares UltraShort

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and ProShares UltraShort at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ProShares Ultra and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProShares Ultra Semiconductors and ProShares UltraShort Utilities, you can compare the effects of market volatilities on ProShares Ultra and ProShares UltraShort and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ProShares Ultra with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and ProShares UltraShort.

Diversification Opportunities for ProShares Ultra and ProShares UltraShort

0.07

Correlation Coefficient

ProShares Ultra  ProShares UltraShort

Significant diversification

The 3 months correlation between ProShares and ProShares is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and ProShares UltraShort Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and ProShares Ultra is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ProShares Ultra Semiconductors are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and ProShares UltraShort go up and down completely randomly.

Pair Corralation between ProShares Ultra and ProShares UltraShort

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to under-perform the ProShares UltraShort. In addition to that, ProShares Ultra is 2.69 times more volatile than ProShares UltraShort Utilities. It trades about -0.01 of its total potential returns per unit of risk. ProShares UltraShort Utilities is currently generating about 0.07 per unit of volatility. If you would invest  1,413  in ProShares UltraShort Utilities on November 28, 2024 and sell it today you would earn a total of  112.00  from holding ProShares UltraShort Utilities or generate 7.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ProShares Ultra Semiconductors  vs.  ProShares UltraShort Utilities

ProShares Ultra Semi

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Ultra Semiconductors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ProShares Ultra is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares UltraShort

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Utilities are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental indicators, ProShares UltraShort may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with ProShares Ultra and ProShares UltraShort

The main advantage of trading using opposite ProShares Ultra and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, ProShares UltraShort can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ProShares UltraShort will offset losses from the drop in ProShares UltraShort's long position.

The idea behind ProShares Ultra Semiconductors and ProShares UltraShort Utilities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.