Can any of the company-specific risk be diversified away by investing in both ProShares Ultra 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 Ultra 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 Ultra Utilities and ProShares Ultra Consumer, you can compare the effects of market volatilities on ProShares Ultra 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 Ultra with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and ProShares Ultra.
Diversification Opportunities for ProShares Ultra and ProShares Ultra
The 3 months correlation between ProShares and ProShares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Utilities and ProShares Ultra Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Consumer 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 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 Consumer has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and ProShares Ultra go up and down completely randomly.
Pair Corralation between ProShares Ultra and ProShares Ultra
Considering the 90-day investment horizon ProShares Ultra Utilities is expected to generate 1.46 times more return on investment than ProShares Ultra. However, ProShares Ultra is 1.46 times more volatile than ProShares Ultra Consumer. It trades about 0.23 of its potential returns per unit of risk. ProShares Ultra Consumer is currently generating about 0.07 per unit of risk. If you would invest 5,150 in ProShares Ultra Utilities on March 6, 2024 and sell it today you would earn a total of 1,446 from holding ProShares Ultra Utilities or generate 28.08% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Utilities are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, ProShares Ultra showed solid returns over the last few months and may actually be approaching a breakup point.
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Consumer 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, ProShares Ultra is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.