Correlation Between ProShares Ultra and American Century

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

Diversification Opportunities for ProShares Ultra and American Century

0.69

Correlation Coefficient

ProShares Ultra  American Century

Poor diversification

The 3 months correlation between ProShares and American is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Yen and American Century ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century ETF 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century ETF has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and American Century go up and down completely randomly.

Pair Corralation between ProShares Ultra and American Century

Considering the 90-day investment horizon ProShares Ultra Yen is expected to generate 14.6 times more return on investment than American Century. However, ProShares Ultra is 14.6 times more volatile than American Century ETF. It trades about 0.11 of its potential returns per unit of risk. American Century ETF is currently generating about 0.23 per unit of risk. If you would invest  2,040  in ProShares Ultra Yen on December 30, 2024 and sell it today you would earn a total of  151.00  from holding ProShares Ultra Yen or generate 7.4% return on investment over 90 days.

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

ProShares Ultra Yen  vs.  American Century ETF

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.

American Century ETF

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Century ETF are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, American Century is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ProShares Ultra and American Century

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

The idea behind ProShares Ultra Yen and American Century ETF 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.