Correlation Between IShares MSCI and ProShares Short

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

By analyzing existing cross correlation between iShares MSCI Canada and ProShares Short MidCap400, you can compare the effects of market volatilities on IShares MSCI and ProShares Short 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 IShares MSCI with a short position of ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and ProShares Short.

Diversification Opportunities for IShares MSCI and ProShares Short

-0.89

Correlation Coefficient

IShares MSCI  ProShares Short

Pay attention - limited upside

The 3 months correlation between IShares and ProShares is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Canada and ProShares Short MidCap400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short MidCap400 and IShares 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 iShares MSCI Canada are associated (or correlated) with ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short MidCap400 has no effect on the direction of IShares MSCI i.e., IShares MSCI and ProShares Short go up and down completely randomly.

Pair Corralation between IShares MSCI and ProShares Short

Considering the 90-day investment horizon iShares MSCI Canada is expected to generate 0.77 times more return on investment than ProShares Short. However, iShares MSCI Canada is 1.3 times less risky than ProShares Short. It trades about 0.02 of its potential returns per unit of risk. ProShares Short MidCap400 is currently generating about -0.06 per unit of risk. If you would invest  4,089  in iShares MSCI Canada on October 24, 2024 and sell it today you would earn a total of  34.00  from holding iShares MSCI Canada or generate 0.83% return on investment over 90 days.

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

iShares MSCI Canada  vs.  ProShares Short MidCap400

iShares MSCI Canada

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Canada are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares MSCI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares Short MidCap400

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Short MidCap400 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ProShares Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares MSCI and ProShares Short

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

The idea behind iShares MSCI Canada and ProShares Short MidCap400 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.