Correlation Between MicroSectors FANG and ProShares UltraPro

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Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and ProShares UltraPro 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 MicroSectors FANG and ProShares UltraPro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and ProShares UltraPro QQQ, you can compare the effects of market volatilities on MicroSectors FANG and ProShares UltraPro 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 MicroSectors FANG with a short position of ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and ProShares UltraPro.

Diversification Opportunities for MicroSectors FANG and ProShares UltraPro

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between MicroSectors and ProShares is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and ProShares UltraPro QQQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro QQQ and MicroSectors FANG 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 MicroSectors FANG Index are associated (or correlated) with ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro QQQ has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and ProShares UltraPro go up and down completely randomly.

Pair Corralation between MicroSectors FANG and ProShares UltraPro

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the ProShares UltraPro. But the etf apears to be less risky and, when comparing its historical volatility, MicroSectors FANG Index is 4.37 times less risky than ProShares UltraPro. The etf trades about -0.26 of its potential returns per unit of risk. The ProShares UltraPro QQQ is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  5,926  in ProShares UltraPro QQQ on May 2, 2025 and sell it today you would earn a total of  3,043  from holding ProShares UltraPro QQQ or generate 51.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy22.95%
ValuesDaily Returns

MicroSectors FANG Index  vs.  ProShares UltraPro QQQ

 Performance 
       Timeline  
MicroSectors FANG Index 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days MicroSectors FANG Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Etf's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.
ProShares UltraPro QQQ 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro QQQ are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ProShares UltraPro reported solid returns over the last few months and may actually be approaching a breakup point.

MicroSectors FANG and ProShares UltraPro Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MicroSectors FANG and ProShares UltraPro

The main advantage of trading using opposite MicroSectors FANG and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, ProShares UltraPro 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 ProShares UltraPro will offset losses from the drop in ProShares UltraPro's long position.
The idea behind MicroSectors FANG Index and ProShares UltraPro QQQ 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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