Correlation Between IShares MSCI and ProShares

Can any of the company-specific risk be diversified away by investing in both IShares 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 IShares MSCI and ProShares 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 K 1 Free, you can compare the effects of market volatilities on IShares 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 IShares MSCI with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and ProShares.

Diversification Opportunities for IShares MSCI and ProShares

-0.38

Correlation Coefficient

IShares MSCI  ProShares

Very good diversification

The 3 months correlation between IShares and ProShares is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Canada and ProShares K 1 Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares K 1 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares K 1 has no effect on the direction of IShares MSCI i.e., IShares MSCI and ProShares go up and down completely randomly.

Pair Corralation between IShares MSCI and ProShares

Considering the 90-day investment horizon IShares MSCI is expected to generate 14.39 times less return on investment than ProShares. But when comparing it to its historical volatility, iShares MSCI Canada is 1.95 times less risky than ProShares. It trades about 0.0 of its potential returns per unit of risk. ProShares K 1 Free is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,415  in ProShares K 1 Free on October 9, 2024 and sell it today you would earn a total of  82.00  from holding ProShares K 1 Free or generate 1.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

iShares MSCI Canada  vs.  ProShares K 1 Free

iShares MSCI Canada

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days iShares MSCI Canada has generated negative risk-adjusted returns adding no value to investors with long positions. 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 K 1

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares K 1 Free are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, ProShares is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares MSCI and ProShares

The main advantage of trading using opposite IShares MSCI and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 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 iShares MSCI Canada and ProShares K 1 Free 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 Global Correlations module to find global opportunities by holding instruments from different markets.