Correlation Between UBS ETRACS and ProShares Ultra

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

Diversification Opportunities for UBS ETRACS and ProShares Ultra

-0.51

Correlation Coefficient

UBS ETRACS  ProShares Ultra

Excellent diversification

The 3 months correlation between UBS and ProShares is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and ProShares Ultra Semiconductors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Semi 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 Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra Semi has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and ProShares Ultra go up and down completely randomly.

Pair Corralation between UBS ETRACS and ProShares Ultra

Given the investment horizon of 90 days UBS ETRACS is expected to under-perform the ProShares Ultra. But the etf apears to be less risky and, when comparing its historical volatility, UBS ETRACS is 1.11 times less risky than ProShares Ultra. The etf trades about -0.02 of its potential returns per unit of risk. The ProShares Ultra Semiconductors is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,938  in ProShares Ultra Semiconductors on September 3, 2024 and sell it today you would earn a total of  1,516  from holding ProShares Ultra Semiconductors or generate 30.7% return on investment over 90 days.

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

UBS ETRACS   vs.  ProShares Ultra Semiconductors

UBS ETRACS

Risk-Adjusted Performance

0 of 100

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 rather sound forward indicators, UBS ETRACS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares Ultra Semi

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UBS ETRACS and ProShares Ultra

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

The idea behind UBS ETRACS and ProShares Ultra Semiconductors 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.