Correlation Between ProShares Short and ProShares Ultra

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

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

Diversification Opportunities for ProShares Short and ProShares Ultra

-1.0

Correlation Coefficient

ProShares Short  ProShares Ultra

Pay attention - limited upside

The 3 months correlation between ProShares and ProShares is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short FTSE and ProShares Ultra FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra FTSE and ProShares Short 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 Short FTSE 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 FTSE has no effect on the direction of ProShares Short i.e., ProShares Short and ProShares Ultra go up and down completely randomly.

Pair Corralation between ProShares Short and ProShares Ultra

Considering the 90-day investment horizon ProShares Short FTSE is expected to under-perform the ProShares Ultra. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Short FTSE is 1.95 times less risky than ProShares Ultra. The etf trades about -0.15 of its potential returns per unit of risk. The ProShares Ultra FTSE is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,892  in ProShares Ultra FTSE on December 27, 2024 and sell it today you would earn a total of  619.00  from holding ProShares Ultra FTSE or generate 32.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

ProShares Short FTSE  vs.  ProShares Ultra FTSE

ProShares Short FTSE

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Short FTSE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

ProShares Ultra FTSE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra FTSE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, ProShares Ultra reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Short and ProShares Ultra

The main advantage of trading using opposite ProShares Short and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Short 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 ProShares Short FTSE and ProShares Ultra FTSE 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.