Correlation Between ProShares Ultra and MicroSectorsTM Oil

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

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

Diversification Opportunities for ProShares Ultra and MicroSectorsTM Oil

-0.7

Correlation Coefficient

ProShares Ultra  MicroSectorsTM Oil

Excellent diversification

The 3 months correlation between ProShares and MicroSectorsTM is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Yen and MicroSectorsTM Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectorsTM Oil Gas 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 Yen are associated (or correlated) with MicroSectorsTM Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectorsTM Oil Gas has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and MicroSectorsTM Oil go up and down completely randomly.

Pair Corralation between ProShares Ultra and MicroSectorsTM Oil

Considering the 90-day investment horizon ProShares Ultra Yen is expected to generate 0.55 times more return on investment than MicroSectorsTM Oil. However, ProShares Ultra Yen is 1.81 times less risky than MicroSectorsTM Oil. It trades about -0.06 of its potential returns per unit of risk. MicroSectorsTM Oil Gas is currently generating about -0.27 per unit of risk. If you would invest  2,324  in ProShares Ultra Yen on February 5, 2024 and sell it today you would lose (58.00) from holding ProShares Ultra Yen or give up 2.5% of portfolio value over 90 days.

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

ProShares Ultra Yen  vs.  MicroSectorsTM Oil Gas

ProShares Ultra Yen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Ultra Yen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

MicroSectorsTM Oil Gas

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectorsTM Oil Gas are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, MicroSectorsTM Oil unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Ultra and MicroSectorsTM Oil

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

The idea behind ProShares Ultra Yen and MicroSectorsTM Oil Gas 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.