Correlation Between ProShares Ultra and MicroSectors Gold

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

Diversification Opportunities for ProShares Ultra and MicroSectors Gold

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between ProShares and MicroSectors is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Gold and MicroSectors Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Gold Miners and ProShares Ultra 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 Ultra Gold are associated (or correlated) with MicroSectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Gold Miners has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and MicroSectors Gold go up and down completely randomly.

Pair Corralation between ProShares Ultra and MicroSectors Gold

Considering the 90-day investment horizon ProShares Ultra Gold is expected to under-perform the MicroSectors Gold. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Ultra Gold is 2.69 times less risky than MicroSectors Gold. The etf trades about -0.01 of its potential returns per unit of risk. The MicroSectors Gold Miners is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,767  in MicroSectors Gold Miners on April 28, 2025 and sell it today you would earn a total of  894.00  from holding MicroSectors Gold Miners or generate 13.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

ProShares Ultra Gold  vs.  MicroSectors Gold Miners

 Performance 
       Timeline  
ProShares Ultra Gold 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days ProShares Ultra Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, ProShares Ultra is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
MicroSectors Gold Miners 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Gold Miners are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, MicroSectors Gold unveiled solid returns over the last few months and may actually be approaching a breakup point.

ProShares Ultra and MicroSectors Gold Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares Ultra and MicroSectors Gold

The main advantage of trading using opposite ProShares Ultra and MicroSectors Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, MicroSectors Gold 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 Gold will offset losses from the drop in MicroSectors Gold's long position.
The idea behind ProShares Ultra Gold and MicroSectors Gold Miners 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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