Correlation Between ProShares Trust and BTCI

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

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

Diversification Opportunities for ProShares Trust and BTCI

0.78

Correlation Coefficient

ProShares Trust  BTCI

Poor diversification

The 3 months correlation between ProShares and BTCI is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and BTCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTCI 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 BTCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTCI has no effect on the direction of ProShares Trust i.e., ProShares Trust and BTCI go up and down completely randomly.

Pair Corralation between ProShares Trust and BTCI

Given the investment horizon of 90 days ProShares Trust is expected to generate 1.01 times less return on investment than BTCI. In addition to that, ProShares Trust is 1.66 times more volatile than BTCI. It trades about 0.13 of its total potential returns per unit of risk. BTCI is currently generating about 0.22 per unit of volatility. If you would invest  4,587  in BTCI on October 23, 2024 and sell it today you would earn a total of  1,968  from holding BTCI or generate 42.9% return on investment over 90 days.

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

ProShares Trust  vs.  BTCI

ProShares Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 10 (%) 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.

BTCI

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BTCI are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, BTCI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Trust and BTCI

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

The idea behind ProShares Trust and BTCI 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.