Correlation Between ProShares UltraPro and WisdomTree Japan

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

By analyzing existing cross correlation between ProShares UltraPro SP500 and WisdomTree Japan Hedged, you can compare the effects of market volatilities on ProShares UltraPro and WisdomTree Japan 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 WisdomTree Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and WisdomTree Japan.

Diversification Opportunities for ProShares UltraPro and WisdomTree Japan

0.87

Correlation Coefficient

ProShares UltraPro  WisdomTree Japan

Very poor diversification

The 3 months correlation between ProShares and WisdomTree is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and WisdomTree Japan Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Japan Hedged 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 SP500 are associated (or correlated) with WisdomTree Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Japan Hedged has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and WisdomTree Japan go up and down completely randomly.

Pair Corralation between ProShares UltraPro and WisdomTree Japan

Given the investment horizon of 90 days ProShares UltraPro SP500 is expected to generate 1.89 times more return on investment than WisdomTree Japan. However, ProShares UltraPro is 1.89 times more volatile than WisdomTree Japan Hedged. It trades about 0.29 of its potential returns per unit of risk. WisdomTree Japan Hedged is currently generating about 0.12 per unit of risk. If you would invest  6,729  in ProShares UltraPro SP500 on April 30, 2025 and sell it today you would earn a total of  3,114  from holding ProShares UltraPro SP500 or generate 46.28% return on investment over 90 days.

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

ProShares UltraPro SP500  vs.  WisdomTree Japan Hedged

ProShares UltraPro SP500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro SP500 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, ProShares UltraPro displayed solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Japan Hedged

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Japan Hedged are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish basic indicators, WisdomTree Japan may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with ProShares UltraPro and WisdomTree Japan

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

The idea behind ProShares UltraPro SP500 and WisdomTree Japan Hedged 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..