Correlation Between ProShares Trust and ProShares Merger

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

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

Diversification Opportunities for ProShares Trust and ProShares Merger

0.48

Correlation Coefficient

ProShares Trust  ProShares Merger

Very weak diversification

The 3 months correlation between ProShares and ProShares is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and ProShares Merger ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Merger ETF and ProShares Trust 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 Trust are associated (or correlated) with ProShares Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Merger ETF has no effect on the direction of ProShares Trust i.e., ProShares Trust and ProShares Merger go up and down completely randomly.

Pair Corralation between ProShares Trust and ProShares Merger

Given the investment horizon of 90 days ProShares Trust is expected to generate 21.59 times more return on investment than ProShares Merger. However, ProShares Trust is 21.59 times more volatile than ProShares Merger ETF. It trades about 0.06 of its potential returns per unit of risk. ProShares Merger ETF is currently generating about 0.26 per unit of risk. If you would invest  2,371  in ProShares Trust on December 30, 2024 and sell it today you would earn a total of  220.00  from holding ProShares Trust or generate 9.28% return on investment over 90 days.

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

ProShares Trust   vs.  ProShares Merger ETF

ProShares Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, ProShares Trust may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ProShares Merger ETF

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Merger ETF are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, ProShares Merger is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ProShares Trust and ProShares Merger

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

The idea behind ProShares Trust and ProShares Merger ETF 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.