Correlation Between ProShares Ultra and DB Gold

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

By analyzing existing cross correlation between ProShares Ultra Yen and DB Gold Double, you can compare the effects of market volatilities on ProShares Ultra and DB Gold 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 DB Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and DB Gold.

Diversification Opportunities for ProShares Ultra and DB Gold

0.82

Correlation Coefficient

ProShares Ultra  DB Gold

Very poor diversification

The 3 months correlation between ProShares and DGP is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Yen and DB Gold Double in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Gold Double 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 Yen are associated (or correlated) with DB Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Gold Double has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and DB Gold go up and down completely randomly.

Pair Corralation between ProShares Ultra and DB Gold

Considering the 90-day investment horizon ProShares Ultra is expected to generate 4.12 times less return on investment than DB Gold. But when comparing it to its historical volatility, ProShares Ultra Yen is 1.48 times less risky than DB Gold. It trades about 0.1 of its potential returns per unit of risk. DB Gold Double is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  6,609  in DB Gold Double on December 27, 2024 and sell it today you would earn a total of  2,189  from holding DB Gold Double or generate 33.12% return on investment over 90 days.

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

ProShares Ultra Yen  vs.  DB Gold Double

ProShares Ultra Yen

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Yen are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, ProShares Ultra may actually be approaching a critical reversion point that can send shares even higher in April 2025.

DB Gold Double

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DB Gold Double are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, DB Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Ultra and DB Gold

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

The idea behind ProShares Ultra Yen and DB Gold Double 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.