Correlation Between UBS ETRACS and ProShares UltraPro

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

Diversification Opportunities for UBS ETRACS and ProShares UltraPro

0.04

Correlation Coefficient

UBS ETRACS  ProShares UltraPro

Significant diversification

The 3 months correlation between UBS and ProShares is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and ProShares UltraPro Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro Short 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 UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro Short has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and ProShares UltraPro go up and down completely randomly.

Pair Corralation between UBS ETRACS and ProShares UltraPro

Given the investment horizon of 90 days UBS ETRACS is expected to under-perform the ProShares UltraPro. In addition to that, UBS ETRACS is 2.35 times more volatile than ProShares UltraPro Short. It trades about -0.04 of its total potential returns per unit of risk. ProShares UltraPro Short is currently generating about 0.11 per unit of volatility. If you would invest  894.00  in ProShares UltraPro Short on December 28, 2024 and sell it today you would earn a total of  182.00  from holding ProShares UltraPro Short or generate 20.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

UBS ETRACS   vs.  ProShares UltraPro Short

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 UltraPro Short

Risk-Adjusted Performance

Modest

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

Pair Trading with UBS ETRACS and ProShares UltraPro

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

The idea behind UBS ETRACS and ProShares UltraPro Short 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.