Correlation Between ProShares UltraPro and MicroSectors FANG

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

By analyzing existing cross correlation between ProShares UltraPro Short and MicroSectors FANG Index, you can compare the effects of market volatilities on ProShares UltraPro and MicroSectors FANG 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 UltraPro with a short position of MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and MicroSectors FANG.

Diversification Opportunities for ProShares UltraPro and MicroSectors FANG

0.74

Correlation Coefficient

ProShares UltraPro  MicroSectors FANG

Poor diversification

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

Pair Corralation between ProShares UltraPro and MicroSectors FANG

Given the investment horizon of 90 days ProShares UltraPro Short is expected to under-perform the MicroSectors FANG. In addition to that, ProShares UltraPro is 1.26 times more volatile than MicroSectors FANG Index. It trades about -0.31 of its total potential returns per unit of risk. MicroSectors FANG Index is currently generating about 0.23 per unit of volatility. If you would invest  39,696  in MicroSectors FANG Index on April 25, 2025 and sell it today you would earn a total of  3,694  from holding MicroSectors FANG Index or generate 9.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	30.65%
Values	Daily Returns

ProShares UltraPro Short  vs.  MicroSectors FANG Index

ProShares UltraPro Short

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares UltraPro Short 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 basic indicators remain relatively invariable which may send shares a bit higher in August 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

MicroSectors FANG Index

Risk-Adjusted Performance

Solid

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 comparatively conflicting technical and fundamental indicators, MicroSectors FANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares UltraPro and MicroSectors FANG

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

The idea behind ProShares UltraPro Short and MicroSectors FANG Index 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.