Correlation Between ProShares Ultra and Teucrium Soybean

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and Teucrium Soybean 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 Teucrium Soybean 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 Teucrium Soybean, you can compare the effects of market volatilities on ProShares Ultra and Teucrium Soybean 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 Teucrium Soybean. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Teucrium Soybean.

Diversification Opportunities for ProShares Ultra and Teucrium Soybean

-0.47

Correlation Coefficient

ProShares Ultra  Teucrium Soybean

Very good diversification

The 3 months correlation between ProShares and Teucrium is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and Teucrium Soybean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teucrium Soybean 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 Teucrium Soybean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teucrium Soybean has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Teucrium Soybean go up and down completely randomly.

Pair Corralation between ProShares Ultra and Teucrium Soybean

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to generate 6.15 times more return on investment than Teucrium Soybean. However, ProShares Ultra is 6.15 times more volatile than Teucrium Soybean. It trades about 0.06 of its potential returns per unit of risk. Teucrium Soybean is currently generating about -0.21 per unit of risk. If you would invest  6,436  in ProShares Ultra Semiconductors on September 17, 2024 and sell it today you would earn a total of  215.00  from holding ProShares Ultra Semiconductors or generate 3.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ProShares Ultra Semiconductors  vs.  Teucrium Soybean

ProShares Ultra Semi

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Teucrium Soybean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teucrium Soybean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Teucrium Soybean is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares Ultra and Teucrium Soybean

The main advantage of trading using opposite ProShares Ultra and Teucrium Soybean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, Teucrium Soybean 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 Teucrium Soybean will offset losses from the drop in Teucrium Soybean's long position.

The idea behind ProShares Ultra Semiconductors and Teucrium Soybean 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.