Correlation Between ProShares Trust and Wisdom Tree

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

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

Diversification Opportunities for ProShares Trust and Wisdom Tree

0.84

Correlation Coefficient

ProShares Trust  Wisdom Tree

Very poor diversification

The 3 months correlation between ProShares and Wisdom is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and Wisdom Tree Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wisdom Tree 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 Wisdom Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wisdom Tree Bitcoin has no effect on the direction of ProShares Trust i.e., ProShares Trust and Wisdom Tree go up and down completely randomly.

Pair Corralation between ProShares Trust and Wisdom Tree

Given the investment horizon of 90 days ProShares Trust is expected to under-perform the Wisdom Tree. In addition to that, ProShares Trust is 1.54 times more volatile than Wisdom Tree Bitcoin. It trades about -0.2 of its total potential returns per unit of risk. Wisdom Tree Bitcoin is currently generating about -0.05 per unit of volatility. If you would invest  9,954  in Wisdom Tree Bitcoin on December 29, 2024 and sell it today you would lose (1,092) from holding Wisdom Tree Bitcoin or give up 10.97% of portfolio value over 90 days.

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

ProShares Trust  vs.  Wisdom Tree Bitcoin

ProShares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Wisdom Tree Bitcoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wisdom Tree Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with ProShares Trust and Wisdom Tree

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

The idea behind ProShares Trust and Wisdom Tree 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.