Correlation Between ProShares Trust and STF Tactical

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

By analyzing existing cross correlation between ProShares Trust and STF Tactical Growth, you can compare the effects of market volatilities on ProShares Trust and STF Tactical 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 STF Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Trust and STF Tactical.

Diversification Opportunities for ProShares Trust and STF Tactical

-0.28

Correlation Coefficient

ProShares Trust  STF Tactical

Very good diversification

The 3 months correlation between ProShares and STF is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and STF Tactical Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STF Tactical Growth 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 STF Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STF Tactical Growth has no effect on the direction of ProShares Trust i.e., ProShares Trust and STF Tactical go up and down completely randomly.

Pair Corralation between ProShares Trust and STF Tactical

Given the investment horizon of 90 days ProShares Trust is expected to generate 2.32 times more return on investment than STF Tactical. However, ProShares Trust is 2.32 times more volatile than STF Tactical Growth. It trades about 0.07 of its potential returns per unit of risk. STF Tactical Growth is currently generating about -0.05 per unit of risk. If you would invest  2,272  in ProShares Trust on December 4, 2024 and sell it today you would earn a total of  230.00  from holding ProShares Trust or generate 10.12% return on investment over 90 days.

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

ProShares Trust   vs.  STF Tactical Growth

ProShares Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, ProShares Trust demonstrated solid returns over the last few months and may actually be approaching a breakup point.

STF Tactical Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days STF Tactical Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, STF Tactical is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ProShares Trust and STF Tactical

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

The idea behind ProShares Trust and STF Tactical Growth 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.