Correlation Between ProShares Large and IQ Merger

Can any of the company-specific risk be diversified away by investing in both ProShares Large and IQ 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 Large and IQ Merger 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 IQ Merger Arbitrage, you can compare the effects of market volatilities on ProShares Large and IQ 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 Large with a short position of IQ Merger. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Large and IQ Merger.

Diversification Opportunities for ProShares Large and IQ Merger

-0.3

Correlation Coefficient

ProShares Large  IQ Merger

Very good diversification

The 3 months correlation between ProShares and MNA is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Large Cap and IQ Merger Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ Merger Arbitrage 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 IQ Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ Merger Arbitrage has no effect on the direction of ProShares Large i.e., ProShares Large and IQ Merger go up and down completely randomly.

Pair Corralation between ProShares Large and IQ Merger

Considering the 90-day investment horizon ProShares Large Cap is expected to generate 4.57 times more return on investment than IQ Merger. However, ProShares Large is 4.57 times more volatile than IQ Merger Arbitrage. It trades about 0.08 of its potential returns per unit of risk. IQ Merger Arbitrage is currently generating about 0.02 per unit of risk. If you would invest  6,646  in ProShares Large Cap on September 19, 2024 and sell it today you would earn a total of  162.00  from holding ProShares Large Cap or generate 2.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

ProShares Large Cap  vs.  IQ Merger Arbitrage

ProShares Large Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Large Cap are ranked lower than 8 (%) 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.

IQ Merger Arbitrage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IQ Merger Arbitrage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IQ Merger is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares Large and IQ Merger

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

The idea behind ProShares Large Cap and IQ Merger Arbitrage 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.