Correlation Between InfraCap MLP and ProShares Decline

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

By analyzing existing cross correlation between InfraCap MLP ETF and ProShares Decline of, you can compare the effects of market volatilities on InfraCap MLP and ProShares Decline 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 InfraCap MLP with a short position of ProShares Decline. Check out your portfolio center. Please also check ongoing floating volatility patterns of InfraCap MLP and ProShares Decline.

Diversification Opportunities for InfraCap MLP and ProShares Decline

0.4

Correlation Coefficient

InfraCap MLP  ProShares Decline

Very weak diversification

The 3 months correlation between InfraCap and ProShares is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding InfraCap MLP ETF and ProShares Decline of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Decline and InfraCap MLP 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 InfraCap MLP ETF are associated (or correlated) with ProShares Decline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Decline has no effect on the direction of InfraCap MLP i.e., InfraCap MLP and ProShares Decline go up and down completely randomly.

Pair Corralation between InfraCap MLP and ProShares Decline

Given the investment horizon of 90 days InfraCap MLP is expected to generate 2.58 times less return on investment than ProShares Decline. In addition to that, InfraCap MLP is 1.47 times more volatile than ProShares Decline of. It trades about 0.05 of its total potential returns per unit of risk. ProShares Decline of is currently generating about 0.2 per unit of volatility. If you would invest  1,249  in ProShares Decline of on December 5, 2024 and sell it today you would earn a total of  158.00  from holding ProShares Decline of or generate 12.65% return on investment over 90 days.

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

InfraCap MLP ETF  vs.  ProShares Decline of

InfraCap MLP ETF

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in InfraCap MLP ETF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, InfraCap MLP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ProShares Decline

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Decline of are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ProShares Decline showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InfraCap MLP and ProShares Decline

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

The idea behind InfraCap MLP ETF and ProShares Decline of 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.