Correlation Between ProShares Ultra and UBS ETRACS

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

Diversification Opportunities for ProShares Ultra and UBS ETRACS

-0.02

Correlation Coefficient

ProShares Ultra  UBS ETRACS

Good diversification

The 3 months correlation between ProShares and UBS is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and UBS ETRACS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETRACS 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 UBS ETRACS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETRACS has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and UBS ETRACS go up and down completely randomly.

Pair Corralation between ProShares Ultra and UBS ETRACS

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to under-perform the UBS ETRACS. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Ultra Semiconductors is 1.19 times less risky than UBS ETRACS. The etf trades about -0.02 of its potential returns per unit of risk. The UBS ETRACS is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,629  in UBS ETRACS on December 1, 2024 and sell it today you would earn a total of  600.00  from holding UBS ETRACS or generate 36.83% return on investment over 90 days.

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

ProShares Ultra Semiconductors  vs.  UBS ETRACS

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 latest unfluctuating performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

UBS ETRACS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UBS ETRACS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, UBS ETRACS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Ultra and UBS ETRACS

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

The idea behind ProShares Ultra Semiconductors and UBS ETRACS 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.