Correlation Between ProShares Ultra and ETRACS Monthly

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

Diversification Opportunities for ProShares Ultra and ETRACS Monthly

0.37

Correlation Coefficient

ProShares Ultra  ETRACS Monthly

Weak diversification

The 3 months correlation between ProShares and ETRACS is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Financials and ETRACS Monthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Monthly Pay 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 ETRACS Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Monthly Pay has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and ETRACS Monthly go up and down completely randomly.

Pair Corralation between ProShares Ultra and ETRACS Monthly

Considering the 90-day investment horizon ProShares Ultra is expected to generate 3.21 times less return on investment than ETRACS Monthly. In addition to that, ProShares Ultra is 1.31 times more volatile than ETRACS Monthly Pay. It trades about 0.03 of its total potential returns per unit of risk. ETRACS Monthly Pay is currently generating about 0.12 per unit of volatility. If you would invest  1,483  in ETRACS Monthly Pay on December 29, 2024 and sell it today you would earn a total of  172.00  from holding ETRACS Monthly Pay or generate 11.6% return on investment over 90 days.

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

ProShares Ultra Financials  vs.  ETRACS Monthly Pay

ProShares Ultra Fina

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Financials are ranked lower than 2 (%) 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.

ETRACS Monthly Pay

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Monthly Pay are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, ETRACS Monthly may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ProShares Ultra and ETRACS Monthly

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

The idea behind ProShares Ultra Financials and ETRACS Monthly Pay 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.