Correlation Between High-yield Municipal and ProShares Trust

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

By analyzing existing cross correlation between High Yield Municipal Fund and ProShares Trust , you can compare the effects of market volatilities on High-yield Municipal and ProShares Trust 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 High-yield Municipal with a short position of ProShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of High-yield Municipal and ProShares Trust.

Diversification Opportunities for High-yield Municipal and ProShares Trust

0.03

Correlation Coefficient

High-yield Municipal  ProShares Trust

Significant diversification

The 3 months correlation between High-yield and ProShares is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust and High-yield Municipal 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 High Yield Municipal Fund are associated (or correlated) with ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of High-yield Municipal i.e., High-yield Municipal and ProShares Trust go up and down completely randomly.

Pair Corralation between High-yield Municipal and ProShares Trust

Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 0.09 times more return on investment than ProShares Trust. However, High Yield Municipal Fund is 11.51 times less risky than ProShares Trust. It trades about 0.07 of its potential returns per unit of risk. ProShares Trust is currently generating about -0.25 per unit of risk. If you would invest  893.00  in High Yield Municipal Fund on September 5, 2024 and sell it today you would earn a total of  11.00  from holding High Yield Municipal Fund or generate 1.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

High Yield Municipal Fund  vs.  ProShares Trust

High Yield Municipal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Municipal Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, High-yield Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ProShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Pair Trading with High-yield Municipal and ProShares Trust

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

The idea behind High Yield Municipal Fund and ProShares Trust 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..