Correlation Between ProShares Ultra and WisdomTree SmallCap

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

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

Diversification Opportunities for ProShares Ultra and WisdomTree SmallCap

0.79

Correlation Coefficient

ProShares Ultra  WisdomTree SmallCap

Poor diversification

The 3 months correlation between ProShares and WisdomTree is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Oil and WisdomTree SmallCap Earnings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree SmallCap 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 Oil are associated (or correlated) with WisdomTree SmallCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree SmallCap has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and WisdomTree SmallCap go up and down completely randomly.

Pair Corralation between ProShares Ultra and WisdomTree SmallCap

Considering the 90-day investment horizon ProShares Ultra Oil is expected to generate 1.98 times more return on investment than WisdomTree SmallCap. However, ProShares Ultra is 1.98 times more volatile than WisdomTree SmallCap Earnings. It trades about -0.08 of its potential returns per unit of risk. WisdomTree SmallCap Earnings is currently generating about -0.2 per unit of risk. If you would invest  3,508  in ProShares Ultra Oil on May 4, 2025 and sell it today you would lose (150.00) from holding ProShares Ultra Oil or give up 4.28% of portfolio value over 90 days.

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

ProShares Ultra Oil  vs.  WisdomTree SmallCap Earnings

ProShares Ultra Oil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Oil are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, ProShares Ultra reported solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree SmallCap

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SmallCap Earnings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, WisdomTree SmallCap is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ProShares Ultra and WisdomTree SmallCap

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

The idea behind ProShares Ultra Oil and WisdomTree SmallCap Earnings 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.