Correlation Between ProShares Ultra and MicroSectors FANG

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and MicroSectors FANG 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 MicroSectors FANG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProShares Ultra Financials and MicroSectors FANG Index, you can compare the effects of market volatilities on ProShares Ultra and MicroSectors FANG 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 MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and MicroSectors FANG.

Diversification Opportunities for ProShares Ultra and MicroSectors FANG

0.06

Correlation Coefficient

ProShares Ultra  MicroSectors FANG

Significant diversification

The 3 months correlation between ProShares and MicroSectors is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Financials and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index 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 Financials are associated (or correlated) with MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and MicroSectors FANG go up and down completely randomly.

Pair Corralation between ProShares Ultra and MicroSectors FANG

Considering the 90-day investment horizon ProShares Ultra is expected to generate 1.48 times less return on investment than MicroSectors FANG. But when comparing it to its historical volatility, ProShares Ultra Financials is 2.68 times less risky than MicroSectors FANG. It trades about 0.04 of its potential returns per unit of risk. MicroSectors FANG Index is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  52,416  in MicroSectors FANG Index on December 2, 2024 and sell it today you would lose (66.00) from holding MicroSectors FANG Index or give up 0.13% of portfolio value over 90 days.

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

ProShares Ultra Financials  vs.  MicroSectors FANG Index

ProShares Ultra Fina

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Financials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ProShares Ultra is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

MicroSectors FANG Index

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MicroSectors FANG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ProShares Ultra and MicroSectors FANG

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

The idea behind ProShares Ultra Financials and MicroSectors FANG Index 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.