Correlation Between ProShares Ultra and T REX

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

By analyzing existing cross correlation between ProShares Ultra SP500 and T REX 2X Long, you can compare the effects of market volatilities on ProShares Ultra and T REX 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 T REX. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and T REX.

Diversification Opportunities for ProShares Ultra and T REX

0.86

Correlation Coefficient

ProShares Ultra  T REX

Very poor diversification

The 3 months correlation between ProShares and TSLT is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra SP500 and T REX 2X Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T REX 2X 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 SP500 are associated (or correlated) with T REX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T REX 2X has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and T REX go up and down completely randomly.

Pair Corralation between ProShares Ultra and T REX

Considering the 90-day investment horizon ProShares Ultra is expected to generate 3.04 times less return on investment than T REX. But when comparing it to its historical volatility, ProShares Ultra SP500 is 3.28 times less risky than T REX. It trades about 0.68 of its potential returns per unit of risk. T REX 2X Long is currently generating about 0.63 of returns per unit of risk over similar time horizon. If you would invest  926.00  in T REX 2X Long on February 17, 2025 and sell it today you would earn a total of  1,179  from holding T REX 2X Long or generate 127.32% return on investment over 90 days.

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

ProShares Ultra SP500  vs.  T REX 2X Long

ProShares Ultra SP500

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Ultra SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ProShares Ultra is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

T REX 2X

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in T REX 2X Long are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, T REX may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with ProShares Ultra and T REX

The main advantage of trading using opposite ProShares Ultra and T REX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra position performs unexpectedly, T REX 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 T REX will offset losses from the drop in T REX's long position.

The idea behind ProShares Ultra SP500 and T REX 2X Long 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.