Correlation Between Microsectors Gold and ProShares

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

By analyzing existing cross correlation between Microsectors Gold 3x and ProShares SP 500, you can compare the effects of market volatilities on Microsectors Gold and ProShares 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 Gold with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsectors Gold and ProShares.

Diversification Opportunities for Microsectors Gold and ProShares

-0.68

Correlation Coefficient

Microsectors Gold  ProShares

Excellent diversification

The 3 months correlation between Microsectors and ProShares is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Microsectors Gold 3x and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 and Microsectors Gold 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 Gold 3x are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of Microsectors Gold i.e., Microsectors Gold and ProShares go up and down completely randomly.

Pair Corralation between Microsectors Gold and ProShares

Given the investment horizon of 90 days Microsectors Gold 3x is expected to generate 1.92 times more return on investment than ProShares. However, Microsectors Gold is 1.92 times more volatile than ProShares SP 500. It trades about 0.19 of its potential returns per unit of risk. ProShares SP 500 is currently generating about -0.06 per unit of risk. If you would invest  4,923  in Microsectors Gold 3x on January 30, 2025 and sell it today you would earn a total of  2,472  from holding Microsectors Gold 3x or generate 50.21% return on investment over 90 days.

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

Microsectors Gold 3x  vs.  ProShares SP 500

Microsectors Gold

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Microsectors Gold 3x are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Microsectors Gold showed solid returns over the last few months and may actually be approaching a breakup point.

ProShares SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Microsectors Gold and ProShares

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

The idea behind Microsectors Gold 3x and ProShares SP 500 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.