Correlation Between ProShares Ultra and Fidelity MSCI

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

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

Diversification Opportunities for ProShares Ultra and Fidelity MSCI

1.0

Correlation Coefficient

ProShares Ultra  Fidelity MSCI

No risk reduction

The 3 months correlation between ProShares and Fidelity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Utilities and Fidelity MSCI Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Utilities 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 Utilities are associated (or correlated) with Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Utilities has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Fidelity MSCI go up and down completely randomly.

Pair Corralation between ProShares Ultra and Fidelity MSCI

Considering the 90-day investment horizon ProShares Ultra Utilities is expected to generate 1.93 times more return on investment than Fidelity MSCI. However, ProShares Ultra is 1.93 times more volatile than Fidelity MSCI Utilities. It trades about 0.06 of its potential returns per unit of risk. Fidelity MSCI Utilities is currently generating about 0.07 per unit of risk. If you would invest  5,549  in ProShares Ultra Utilities on January 29, 2024 and sell it today you would earn a total of  117.00  from holding ProShares Ultra Utilities or generate 2.11% return on investment over 90 days.

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

ProShares Ultra Utilities  vs.  Fidelity MSCI Utilities

ProShares Ultra Utilities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Utilities are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, ProShares Ultra showed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity MSCI Utilities

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity MSCI Utilities are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Fidelity MSCI may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with ProShares Ultra and Fidelity MSCI

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

The idea behind ProShares Ultra Utilities and Fidelity MSCI Utilities 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.