Correlation Between ProShares Large and IndexIQ

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

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

Diversification Opportunities for ProShares Large and IndexIQ

0.61

Correlation Coefficient

ProShares Large  IndexIQ

Poor diversification

The 3 months correlation between ProShares and IndexIQ is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Large Cap and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ and ProShares Large 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 Large Cap are associated (or correlated) with IndexIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ has no effect on the direction of ProShares Large i.e., ProShares Large and IndexIQ go up and down completely randomly.

Pair Corralation between ProShares Large and IndexIQ

Considering the 90-day investment horizon ProShares Large Cap is expected to generate 2.17 times more return on investment than IndexIQ. However, ProShares Large is 2.17 times more volatile than IndexIQ. It trades about 0.1 of its potential returns per unit of risk. IndexIQ is currently generating about 0.11 per unit of risk. If you would invest  4,400  in ProShares Large Cap on September 20, 2024 and sell it today you would earn a total of  2,235  from holding ProShares Large Cap or generate 50.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	28.43%
Values	Daily Returns

ProShares Large Cap  vs.  IndexIQ

ProShares Large Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Large Cap are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ProShares Large is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

IndexIQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IndexIQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IndexIQ is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ProShares Large and IndexIQ

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

The idea behind ProShares Large Cap and IndexIQ 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 Transaction History module to view history of all your transactions and understand their impact on performance.