Correlation Between ProShares UltraShort and ETRACS Monthly

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

By analyzing existing cross correlation between ProShares UltraShort Yen and ETRACS Monthly Pay, you can compare the effects of market volatilities on ProShares UltraShort and ETRACS Monthly 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 UltraShort with a short position of ETRACS Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and ETRACS Monthly.

Diversification Opportunities for ProShares UltraShort and ETRACS Monthly

0.32

Correlation Coefficient

ProShares UltraShort  ETRACS Monthly

Weak diversification

The 3 months correlation between ProShares and ETRACS is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Yen and ETRACS Monthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Monthly Pay and ProShares UltraShort 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 UltraShort Yen are associated (or correlated) with ETRACS Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Monthly Pay has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ETRACS Monthly go up and down completely randomly.

Pair Corralation between ProShares UltraShort and ETRACS Monthly

Considering the 90-day investment horizon ProShares UltraShort Yen is expected to generate 1.81 times more return on investment than ETRACS Monthly. However, ProShares UltraShort is 1.81 times more volatile than ETRACS Monthly Pay. It trades about 0.2 of its potential returns per unit of risk. ETRACS Monthly Pay is currently generating about 0.07 per unit of risk. If you would invest  3,717  in ProShares UltraShort Yen on September 16, 2024 and sell it today you would earn a total of  805.00  from holding ProShares UltraShort Yen or generate 21.66% return on investment over 90 days.

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

ProShares UltraShort Yen  vs.  ETRACS Monthly Pay

ProShares UltraShort Yen

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Yen are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, ProShares UltraShort unveiled solid returns over the last few months and may actually be approaching a breakup point.

ETRACS Monthly Pay

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS Monthly Pay are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, ETRACS Monthly is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ProShares UltraShort and ETRACS Monthly

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

The idea behind ProShares UltraShort Yen and ETRACS Monthly Pay 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.