Correlation Between ProShares and ProShares Smart

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

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

Diversification Opportunities for ProShares and ProShares Smart

0.2

Correlation Coefficient

ProShares  ProShares Smart

Modest diversification

The 3 months correlation between ProShares and ProShares is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP Kensho and ProShares Smart Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Smart Materials and ProShares 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 SP Kensho are associated (or correlated) with ProShares Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Smart Materials has no effect on the direction of ProShares i.e., ProShares and ProShares Smart go up and down completely randomly.

Pair Corralation between ProShares and ProShares Smart

Given the investment horizon of 90 days ProShares SP Kensho is expected to under-perform the ProShares Smart. In addition to that, ProShares is 2.31 times more volatile than ProShares Smart Materials. It trades about -0.11 of its total potential returns per unit of risk. ProShares Smart Materials is currently generating about -0.13 per unit of volatility. If you would invest  3,132  in ProShares Smart Materials on December 4, 2024 and sell it today you would lose (246.00) from holding ProShares Smart Materials or give up 7.85% of portfolio value over 90 days.

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

ProShares SP Kensho  vs.  ProShares Smart Materials

ProShares SP Kensho

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares SP Kensho has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

ProShares Smart Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Smart Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with ProShares and ProShares Smart

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

The idea behind ProShares SP Kensho and ProShares Smart Materials 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.