Correlation Between ProShares UltraShort and WisdomTree Global

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

By analyzing existing cross correlation between ProShares UltraShort Nasdaq and WisdomTree Global High, you can compare the effects of market volatilities on ProShares UltraShort and WisdomTree Global 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 UltraShort with a short position of WisdomTree Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and WisdomTree Global.

Diversification Opportunities for ProShares UltraShort and WisdomTree Global

-0.77

Correlation Coefficient

ProShares UltraShort  WisdomTree Global

Pay attention - limited upside

The 3 months correlation between ProShares and WisdomTree is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Nasdaq and WisdomTree Global High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Global High and ProShares UltraShort 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 UltraShort Nasdaq are associated (or correlated) with WisdomTree Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Global High has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and WisdomTree Global go up and down completely randomly.

Pair Corralation between ProShares UltraShort and WisdomTree Global

Considering the 90-day investment horizon ProShares UltraShort Nasdaq is expected to generate 3.13 times more return on investment than WisdomTree Global. However, ProShares UltraShort is 3.13 times more volatile than WisdomTree Global High. It trades about 0.04 of its potential returns per unit of risk. WisdomTree Global High is currently generating about 0.06 per unit of risk. If you would invest  1,714  in ProShares UltraShort Nasdaq on February 8, 2025 and sell it today you would earn a total of  314.00  from holding ProShares UltraShort Nasdaq or generate 18.32% return on investment over 90 days.

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

ProShares UltraShort Nasdaq  vs.  WisdomTree Global High

ProShares UltraShort

Risk-Adjusted Performance

OK

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

WisdomTree Global High

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Global High are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, WisdomTree Global is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ProShares UltraShort and WisdomTree Global

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

The idea behind ProShares UltraShort Nasdaq and WisdomTree Global High 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.