Correlation Between ProShares Ultra and PGIM Large

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

By analyzing existing cross correlation between ProShares Ultra Euro and PGIM Large Cap Buffer, you can compare the effects of market volatilities on ProShares Ultra and PGIM Large 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 PGIM Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and PGIM Large.

Diversification Opportunities for ProShares Ultra and PGIM Large

-0.73

Correlation Coefficient

ProShares Ultra  PGIM Large

Pay attention - limited upside

The 3 months correlation between ProShares and PGIM is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Euro and PGIM Large Cap Buffer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM Large Cap 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 Euro are associated (or correlated) with PGIM Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM Large Cap has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and PGIM Large go up and down completely randomly.

Pair Corralation between ProShares Ultra and PGIM Large

Considering the 90-day investment horizon ProShares Ultra Euro is expected to generate 1.08 times more return on investment than PGIM Large. However, ProShares Ultra is 1.08 times more volatile than PGIM Large Cap Buffer. It trades about 0.2 of its potential returns per unit of risk. PGIM Large Cap Buffer is currently generating about -0.01 per unit of risk. If you would invest  1,029  in ProShares Ultra Euro on February 3, 2025 and sell it today you would earn a total of  206.00  from holding ProShares Ultra Euro or generate 20.02% return on investment over 90 days.

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

ProShares Ultra Euro  vs.  PGIM Large Cap Buffer

ProShares Ultra Euro

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Euro are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

PGIM Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days PGIM Large Cap Buffer has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PGIM Large is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ProShares Ultra and PGIM Large

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

The idea behind ProShares Ultra Euro and PGIM Large Cap Buffer 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.