Correlation Between ProShares MSCI and ProShares

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

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

Diversification Opportunities for ProShares MSCI and ProShares

0.71

Correlation Coefficient

ProShares MSCI  ProShares

Poor diversification

The 3 months correlation between ProShares and ProShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ProShares MSCI Europe and ProShares SP Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP Technology 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 Europe are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP Technology has no effect on the direction of ProShares MSCI i.e., ProShares MSCI and ProShares go up and down completely randomly.

Pair Corralation between ProShares MSCI and ProShares

Given the investment horizon of 90 days ProShares MSCI Europe is expected to generate 0.84 times more return on investment than ProShares. However, ProShares MSCI Europe is 1.19 times less risky than ProShares. It trades about 0.07 of its potential returns per unit of risk. ProShares SP Technology is currently generating about -0.02 per unit of risk. If you would invest  4,898  in ProShares MSCI Europe on December 6, 2024 and sell it today you would earn a total of  165.00  from holding ProShares MSCI Europe or generate 3.37% return on investment over 90 days.

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

ProShares MSCI Europe  vs.  ProShares SP Technology

ProShares MSCI Europe

Risk-Adjusted Performance

Modest

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

ProShares SP Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares SP Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, ProShares is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ProShares MSCI and ProShares

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

The idea behind ProShares MSCI Europe and ProShares SP Technology 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.