Correlation Between ProShares VIX and ProShares Ultra

Can any of the company-specific risk be diversified away by investing in both ProShares VIX 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 VIX 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 VIX Short Term and ProShares Ultra VIX, you can compare the effects of market volatilities on ProShares VIX 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 VIX with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares VIX and ProShares Ultra.

Diversification Opportunities for ProShares VIX and ProShares Ultra

0.65

Correlation Coefficient

ProShares VIX  ProShares Ultra

Poor diversification

The 3 months correlation between ProShares and ProShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ProShares VIX Short Term and ProShares Ultra VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra VIX and ProShares VIX 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 VIX Short Term 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 VIX has no effect on the direction of ProShares VIX i.e., ProShares VIX and ProShares Ultra go up and down completely randomly.

Pair Corralation between ProShares VIX and ProShares Ultra

Given the investment horizon of 90 days ProShares VIX is expected to generate 103.37 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, ProShares VIX Short Term is 23.37 times less risky than ProShares Ultra. It trades about 0.05 of its potential returns per unit of risk. ProShares Ultra VIX is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  632.00  in ProShares Ultra VIX on January 29, 2024 and sell it today you would earn a total of  2,637  from holding ProShares Ultra VIX or generate 417.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

ProShares VIX Short Term  vs.  ProShares Ultra VIX

ProShares VIX Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares VIX Short Term has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ProShares VIX is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ProShares Ultra VIX

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra VIX are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ProShares Ultra showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares VIX and ProShares Ultra

The main advantage of trading using opposite ProShares VIX and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares VIX 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 VIX Short Term and ProShares Ultra VIX 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.