Correlation Between ProShares Ultra and Horizon Kinetics

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

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

Diversification Opportunities for ProShares Ultra and Horizon Kinetics

0.83

Correlation Coefficient

ProShares Ultra  Horizon Kinetics

Very poor diversification

The 3 months correlation between ProShares and Horizon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Nasdaq and Horizon Kinetics Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Kinetics Medical 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 Nasdaq are associated (or correlated) with Horizon Kinetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Kinetics Medical has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Horizon Kinetics go up and down completely randomly.

Pair Corralation between ProShares Ultra and Horizon Kinetics

Considering the 90-day investment horizon ProShares Ultra Nasdaq is expected to under-perform the Horizon Kinetics. In addition to that, ProShares Ultra is 2.85 times more volatile than Horizon Kinetics Medical. It trades about -0.3 of its total potential returns per unit of risk. Horizon Kinetics Medical is currently generating about -0.49 per unit of volatility. If you would invest  2,963  in Horizon Kinetics Medical on January 29, 2024 and sell it today you would lose (214.00) from holding Horizon Kinetics Medical or give up 7.22% of portfolio value over 90 days.

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

ProShares Ultra Nasdaq  vs.  Horizon Kinetics Medical

ProShares Ultra Nasdaq

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra Nasdaq has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's forward indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Horizon Kinetics Medical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ProShares Ultra and Horizon Kinetics

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

The idea behind ProShares Ultra Nasdaq and Horizon Kinetics Medical 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.