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 STOXX, 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

-0.59

Correlation Coefficient

ProShares Ultra  American Century

Excellent diversification

The 3 months correlation between ProShares and American is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Yen and American Century STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century STOXX 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 STOXX 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 under-perform the American Century. In addition to that, ProShares Ultra is 1.84 times more volatile than American Century STOXX. It trades about -0.06 of its total potential returns per unit of risk. American Century STOXX is currently generating about 0.09 per unit of volatility. If you would invest  4,572  in American Century STOXX on September 18, 2024 and sell it today you would earn a total of  1,759  from holding American Century STOXX or generate 38.47% return on investment over 90 days.

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

ProShares Ultra Yen  vs.  American Century STOXX

ProShares Ultra Yen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra Yen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Etf's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

American Century STOXX

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Century STOXX are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, American Century is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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 STOXX 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.