Correlation Between ProShares Ultra and Pacer Pacific

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

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

Diversification Opportunities for ProShares Ultra and Pacer Pacific

0.8

Correlation Coefficient

ProShares Ultra  Pacer Pacific

Very poor diversification

The 3 months correlation between ProShares and Pacer is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and Pacer Pacific Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Pacific Asset 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 Semiconductors are associated (or correlated) with Pacer Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Pacific Asset has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Pacer Pacific go up and down completely randomly.

Pair Corralation between ProShares Ultra and Pacer Pacific

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to generate 50.42 times more return on investment than Pacer Pacific. However, ProShares Ultra is 50.42 times more volatile than Pacer Pacific Asset. It trades about 0.03 of its potential returns per unit of risk. Pacer Pacific Asset is currently generating about 0.22 per unit of risk. If you would invest  5,919  in ProShares Ultra Semiconductors on August 30, 2024 and sell it today you would earn a total of  158.00  from holding ProShares Ultra Semiconductors or generate 2.67% return on investment over 90 days.

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

ProShares Ultra Semiconductors  vs.  Pacer Pacific Asset

ProShares Ultra Semi

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, ProShares Ultra may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pacer Pacific Asset

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Pacific Asset are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Pacer Pacific is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ProShares Ultra and Pacer Pacific

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

The idea behind ProShares Ultra Semiconductors and Pacer Pacific Asset 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.