Correlation Between ProShares MSCI and SmartETFs Asia

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

By analyzing existing cross correlation between ProShares MSCI Emerging and SmartETFs Asia Pacific, you can compare the effects of market volatilities on ProShares MSCI and SmartETFs Asia 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 MSCI with a short position of SmartETFs Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares MSCI and SmartETFs Asia.

Diversification Opportunities for ProShares MSCI and SmartETFs Asia

0.96

Correlation Coefficient

ProShares MSCI  SmartETFs Asia

Almost no diversification

The 3 months correlation between ProShares and SmartETFs is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding ProShares MSCI Emerging and SmartETFs Asia Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmartETFs Asia Pacific and ProShares MSCI 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 MSCI Emerging are associated (or correlated) with SmartETFs Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SmartETFs Asia Pacific has no effect on the direction of ProShares MSCI i.e., ProShares MSCI and SmartETFs Asia go up and down completely randomly.

Pair Corralation between ProShares MSCI and SmartETFs Asia

Given the investment horizon of 90 days ProShares MSCI Emerging is expected to generate 1.21 times more return on investment than SmartETFs Asia. However, ProShares MSCI is 1.21 times more volatile than SmartETFs Asia Pacific. It trades about 0.07 of its potential returns per unit of risk. SmartETFs Asia Pacific is currently generating about 0.07 per unit of risk. If you would invest  4,180  in ProShares MSCI Emerging on September 12, 2024 and sell it today you would earn a total of  285.00  from holding ProShares MSCI Emerging or generate 6.82% return on investment over 90 days.

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

ProShares MSCI Emerging  vs.  SmartETFs Asia Pacific

ProShares MSCI Emerging

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares MSCI Emerging are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, ProShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SmartETFs Asia Pacific

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SmartETFs Asia Pacific are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, SmartETFs Asia is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ProShares MSCI and SmartETFs Asia

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

The idea behind ProShares MSCI Emerging and SmartETFs Asia Pacific 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.