Correlation Between ProShares UltraShort and ETRACS Monthly

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

By analyzing existing cross correlation between ProShares UltraShort Yen and ETRACS Monthly Pay, you can compare the effects of market volatilities on ProShares UltraShort and ETRACS Monthly 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 UltraShort with a short position of ETRACS Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and ETRACS Monthly.

Diversification Opportunities for ProShares UltraShort and ETRACS Monthly

0.7

Correlation Coefficient

ProShares UltraShort  ETRACS Monthly

Poor diversification

The 3 months correlation between ProShares and ETRACS is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Yen and ETRACS Monthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Monthly Pay and ProShares UltraShort 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 UltraShort Yen are associated (or correlated) with ETRACS Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Monthly Pay has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and ETRACS Monthly go up and down completely randomly.

Pair Corralation between ProShares UltraShort and ETRACS Monthly

Considering the 90-day investment horizon ProShares UltraShort Yen is expected to under-perform the ETRACS Monthly. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraShort Yen is 1.26 times less risky than ETRACS Monthly. The etf trades about -0.08 of its potential returns per unit of risk. The ETRACS Monthly Pay is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,954  in ETRACS Monthly Pay on February 7, 2025 and sell it today you would lose (141.00) from holding ETRACS Monthly Pay or give up 7.22% of portfolio value over 90 days.

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

ProShares UltraShort Yen  vs.  ETRACS Monthly Pay

ProShares UltraShort Yen

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares UltraShort Yen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

ETRACS Monthly Pay

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETRACS Monthly Pay has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ETRACS Monthly is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ProShares UltraShort and ETRACS Monthly

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

The idea behind ProShares UltraShort Yen and ETRACS Monthly Pay 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.