Correlation Between Invesco DB and ProShares Ultra

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

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

Diversification Opportunities for Invesco DB and ProShares Ultra

-0.83

Correlation Coefficient

Invesco DB  ProShares Ultra

Pay attention - limited upside

The 3 months correlation between Invesco and ProShares is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Dollar and ProShares Ultra Euro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Euro and Invesco DB 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 Invesco DB Dollar 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 Euro has no effect on the direction of Invesco DB i.e., Invesco DB and ProShares Ultra go up and down completely randomly.

Pair Corralation between Invesco DB and ProShares Ultra

Considering the 90-day investment horizon Invesco DB Dollar is expected to generate 0.52 times more return on investment than ProShares Ultra. However, Invesco DB Dollar is 1.92 times less risky than ProShares Ultra. It trades about 0.12 of its potential returns per unit of risk. ProShares Ultra Euro is currently generating about -0.06 per unit of risk. If you would invest  2,834  in Invesco DB Dollar on February 5, 2024 and sell it today you would earn a total of  31.00  from holding Invesco DB Dollar or generate 1.09% return on investment over 90 days.

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

Invesco DB Dollar  vs.  ProShares Ultra Euro

Invesco DB Dollar

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Dollar are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Invesco DB is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

ProShares Ultra Euro

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Euro are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, ProShares Ultra is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco DB and ProShares Ultra

The main advantage of trading using opposite Invesco DB and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DB 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 Invesco DB Dollar and ProShares Ultra Euro 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.