Correlation Between ProShares Ultra and AXS 2X

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra and AXS 2X 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 AXS 2X 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 AXS 2X Innovation, you can compare the effects of market volatilities on ProShares Ultra and AXS 2X 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 AXS 2X. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and AXS 2X.

Diversification Opportunities for ProShares Ultra and AXS 2X

0.16

Correlation Coefficient

ProShares Ultra  AXS 2X

Average diversification

The 3 months correlation between ProShares and AXS is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Financials and AXS 2X Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXS 2X Innovation 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 AXS 2X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXS 2X Innovation has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and AXS 2X go up and down completely randomly.

Pair Corralation between ProShares Ultra and AXS 2X

Considering the 90-day investment horizon ProShares Ultra Financials is expected to under-perform the AXS 2X. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Ultra Financials is 2.74 times less risky than AXS 2X. The etf trades about -0.26 of its potential returns per unit of risk. The AXS 2X Innovation is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,868  in AXS 2X Innovation on October 3, 2024 and sell it today you would lose (373.00) from holding AXS 2X Innovation or give up 7.66% 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.  AXS 2X Innovation

ProShares Ultra Fina

Risk-Adjusted Performance

7 of 100

OK

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

AXS 2X Innovation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AXS 2X Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, AXS 2X is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ProShares Ultra and AXS 2X

The main advantage of trading using opposite ProShares Ultra and AXS 2X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, AXS 2X 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 AXS 2X will offset losses from the drop in AXS 2X's long position.

The idea behind ProShares Ultra Financials and AXS 2X Innovation 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.