Correlation Between ETRACS 2xMonthly and ProShares UltraShort

Can any of the company-specific risk be diversified away by investing in both ETRACS 2xMonthly and ProShares UltraShort 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 ETRACS 2xMonthly and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ETRACS 2xMonthly Pay and ProShares UltraShort Utilities, you can compare the effects of market volatilities on ETRACS 2xMonthly and ProShares UltraShort 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 ETRACS 2xMonthly with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2xMonthly and ProShares UltraShort.

Diversification Opportunities for ETRACS 2xMonthly and ProShares UltraShort

-0.74

Correlation Coefficient

ETRACS 2xMonthly  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between ETRACS and ProShares is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2xMonthly Pay and ProShares UltraShort Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and ETRACS 2xMonthly 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 ETRACS 2xMonthly Pay are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of ETRACS 2xMonthly i.e., ETRACS 2xMonthly and ProShares UltraShort go up and down completely randomly.

Pair Corralation between ETRACS 2xMonthly and ProShares UltraShort

Given the investment horizon of 90 days ETRACS 2xMonthly Pay is expected to generate 0.72 times more return on investment than ProShares UltraShort. However, ETRACS 2xMonthly Pay is 1.38 times less risky than ProShares UltraShort. It trades about 0.1 of its potential returns per unit of risk. ProShares UltraShort Utilities is currently generating about -0.13 per unit of risk. If you would invest  796.00  in ETRACS 2xMonthly Pay on May 5, 2025 and sell it today you would earn a total of  59.00  from holding ETRACS 2xMonthly Pay or generate 7.41% return on investment over 90 days.

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

ETRACS 2xMonthly Pay  vs.  ProShares UltraShort Utilities

ETRACS 2xMonthly Pay

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ETRACS 2xMonthly Pay are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, ETRACS 2xMonthly may actually be approaching a critical reversion point that can send shares even higher in September 2025.

ProShares UltraShort

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares UltraShort Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's fundamental indicators remain relatively invariable which may send shares a bit higher in September 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with ETRACS 2xMonthly and ProShares UltraShort

The main advantage of trading using opposite ETRACS 2xMonthly and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2xMonthly position performs unexpectedly, ProShares UltraShort 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 UltraShort will offset losses from the drop in ProShares UltraShort's long position.

The idea behind ETRACS 2xMonthly Pay and ProShares UltraShort Utilities 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 Transaction History module to view history of all your transactions and understand their impact on performance.