Correlation Between Roundhill Investments and ProShares Ultra

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

By analyzing existing cross correlation between Roundhill Investments and ProShares Ultra Industrials, you can compare the effects of market volatilities on Roundhill Investments and ProShares Ultra 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 Roundhill Investments with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roundhill Investments and ProShares Ultra.

Diversification Opportunities for Roundhill Investments and ProShares Ultra

0.76

Correlation Coefficient

Roundhill Investments  ProShares Ultra

Poor diversification

The 3 months correlation between Roundhill and ProShares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Investments and ProShares Ultra Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Indu and Roundhill Investments 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 Roundhill Investments are associated (or correlated) with ProShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra Indu has no effect on the direction of Roundhill Investments i.e., Roundhill Investments and ProShares Ultra go up and down completely randomly.

Pair Corralation between Roundhill Investments and ProShares Ultra

Given the investment horizon of 90 days Roundhill Investments is expected to generate 1.37 times more return on investment than ProShares Ultra. However, Roundhill Investments is 1.37 times more volatile than ProShares Ultra Industrials. It trades about 0.27 of its potential returns per unit of risk. ProShares Ultra Industrials is currently generating about 0.1 per unit of risk. If you would invest  3,372  in Roundhill Investments on August 31, 2024 and sell it today you would earn a total of  694.00  from holding Roundhill Investments or generate 20.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	8.58%
Values	Daily Returns

Roundhill Investments  vs.  ProShares Ultra Industrials

Roundhill Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roundhill Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Roundhill Investments is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares Ultra Indu

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Industrials are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, ProShares Ultra demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roundhill Investments and ProShares Ultra

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

The idea behind Roundhill Investments and ProShares Ultra Industrials 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.