Correlation Between ProShares Hedge and Formidable ETF

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

By analyzing existing cross correlation between ProShares Hedge Replication and Formidable ETF, you can compare the effects of market volatilities on ProShares Hedge and Formidable ETF 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 Hedge with a short position of Formidable ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Hedge and Formidable ETF.

Diversification Opportunities for ProShares Hedge and Formidable ETF

0.55

Correlation Coefficient

ProShares Hedge  Formidable ETF

Very weak diversification

The 3 months correlation between ProShares and Formidable is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Hedge Replication and Formidable ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formidable ETF and ProShares Hedge 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 Hedge Replication are associated (or correlated) with Formidable ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formidable ETF has no effect on the direction of ProShares Hedge i.e., ProShares Hedge and Formidable ETF go up and down completely randomly.

Pair Corralation between ProShares Hedge and Formidable ETF

Considering the 90-day investment horizon ProShares Hedge Replication is expected to under-perform the Formidable ETF. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Hedge Replication is 2.66 times less risky than Formidable ETF. The etf trades about -0.03 of its potential returns per unit of risk. The Formidable ETF is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,103  in Formidable ETF on December 30, 2024 and sell it today you would lose (5.00) from holding Formidable ETF or give up 0.24% of portfolio value over 90 days.

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

ProShares Hedge Replication  vs.  Formidable ETF

ProShares Hedge Repl

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Hedge Replication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, ProShares Hedge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Formidable ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Formidable ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Formidable ETF is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ProShares Hedge and Formidable ETF

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

The idea behind ProShares Hedge Replication and Formidable ETF 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.