Correlation Between ProShares Trust and ARK 21Shares

Can any of the company-specific risk be diversified away by investing in both ProShares Trust and ARK 21Shares 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 ARK 21Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProShares Trust and ARK 21Shares Bitcoin, you can compare the effects of market volatilities on ProShares Trust and ARK 21Shares 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 ARK 21Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Trust and ARK 21Shares.

Diversification Opportunities for ProShares Trust and ARK 21Shares

0.94

Correlation Coefficient

ProShares Trust  ARK 21Shares

Almost no diversification

The 3 months correlation between ProShares and ARK is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and ARK 21Shares Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK 21Shares Bitcoin 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 ARK 21Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK 21Shares Bitcoin has no effect on the direction of ProShares Trust i.e., ProShares Trust and ARK 21Shares go up and down completely randomly.

Pair Corralation between ProShares Trust and ARK 21Shares

Given the investment horizon of 90 days ProShares Trust is expected to generate 1.28 times less return on investment than ARK 21Shares. In addition to that, ProShares Trust is 1.29 times more volatile than ARK 21Shares Bitcoin. It trades about 0.16 of its total potential returns per unit of risk. ARK 21Shares Bitcoin is currently generating about 0.26 per unit of volatility. If you would invest  5,795  in ARK 21Shares Bitcoin on September 2, 2024 and sell it today you would earn a total of  3,902  from holding ARK 21Shares Bitcoin or generate 67.33% return on investment over 90 days.

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

ProShares Trust  vs.  ARK 21Shares Bitcoin

ProShares Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 12 (%) 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.

ARK 21Shares Bitcoin

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARK 21Shares Bitcoin are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward-looking signals, ARK 21Shares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Trust and ARK 21Shares

The main advantage of trading using opposite ProShares Trust and ARK 21Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Trust position performs unexpectedly, ARK 21Shares 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 ARK 21Shares will offset losses from the drop in ARK 21Shares' long position.

The idea behind ProShares Trust and ARK 21Shares Bitcoin 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.