Correlation Between ProShares UltraPro and IQ Hedge

Can any of the company-specific risk be diversified away by investing in both ProShares UltraPro and IQ Hedge 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 IQ Hedge 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 IQ Hedge Multi Strategy, you can compare the effects of market volatilities on ProShares UltraPro and IQ Hedge 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 IQ Hedge. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and IQ Hedge.

Diversification Opportunities for ProShares UltraPro and IQ Hedge

0.98

Correlation Coefficient

ProShares UltraPro  IQ Hedge

Almost no diversification

The 3 months correlation between ProShares and QAI is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and IQ Hedge Multi Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Hedge Multi 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 IQ Hedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Hedge Multi has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and IQ Hedge go up and down completely randomly.

Pair Corralation between ProShares UltraPro and IQ Hedge

Given the investment horizon of 90 days ProShares UltraPro SP500 is expected to generate 8.39 times more return on investment than IQ Hedge. However, ProShares UltraPro is 8.39 times more volatile than IQ Hedge Multi Strategy. It trades about 0.38 of its potential returns per unit of risk. IQ Hedge Multi Strategy is currently generating about 0.35 per unit of risk. If you would invest  5,400  in ProShares UltraPro SP500 on April 20, 2025 and sell it today you would earn a total of  4,117  from holding ProShares UltraPro SP500 or generate 76.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

ProShares UltraPro SP500  vs.  IQ Hedge Multi Strategy

ProShares UltraPro SP500

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro SP500 are ranked lower than 29 (%) 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.

IQ Hedge Multi

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in IQ Hedge Multi Strategy are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, IQ Hedge may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with ProShares UltraPro and IQ Hedge

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

The idea behind ProShares UltraPro SP500 and IQ Hedge Multi Strategy 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.