Correlation Between UBS ETRACS and ProShares UltraShort

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

By analyzing existing cross correlation between UBS ETRACS and ProShares UltraShort Bloomberg, you can compare the effects of market volatilities on UBS ETRACS and ProShares UltraShort 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 UBS ETRACS with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS ETRACS and ProShares UltraShort.

Diversification Opportunities for UBS ETRACS and ProShares UltraShort

0.39

Correlation Coefficient

UBS ETRACS  ProShares UltraShort

Weak diversification

The 3 months correlation between UBS and ProShares is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and ProShares UltraShort Bloomberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and UBS ETRACS 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 UBS ETRACS are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and ProShares UltraShort go up and down completely randomly.

Pair Corralation between UBS ETRACS and ProShares UltraShort

Given the investment horizon of 90 days UBS ETRACS is expected to under-perform the ProShares UltraShort. In addition to that, UBS ETRACS is 3.17 times more volatile than ProShares UltraShort Bloomberg. It trades about -0.07 of its total potential returns per unit of risk. ProShares UltraShort Bloomberg is currently generating about 0.02 per unit of volatility. If you would invest  1,787  in ProShares UltraShort Bloomberg on December 25, 2024 and sell it today you would earn a total of  9.00  from holding ProShares UltraShort Bloomberg or generate 0.5% return on investment over 90 days.

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

UBS ETRACS   vs.  ProShares UltraShort Bloomberg

UBS ETRACS

Risk-Adjusted Performance

Very Weak

Over the last 90 days UBS ETRACS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

ProShares UltraShort

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Bloomberg are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, ProShares UltraShort is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with UBS ETRACS and ProShares UltraShort

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

The idea behind UBS ETRACS and ProShares UltraShort Bloomberg 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.