Correlation Between ProShares Investment and WisdomTree Interest

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

By analyzing existing cross correlation between ProShares Investment GradeInterest and WisdomTree Interest Rate, you can compare the effects of market volatilities on ProShares Investment and WisdomTree Interest 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 Investment with a short position of WisdomTree Interest. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Investment and WisdomTree Interest.

Diversification Opportunities for ProShares Investment and WisdomTree Interest

0.69

Correlation Coefficient

ProShares Investment  WisdomTree Interest

Poor diversification

The 3 months correlation between ProShares and WisdomTree is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Investment GradeInte and WisdomTree Interest Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Interest Rate and ProShares Investment 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 Investment GradeInterest are associated (or correlated) with WisdomTree Interest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Interest Rate has no effect on the direction of ProShares Investment i.e., ProShares Investment and WisdomTree Interest go up and down completely randomly.

Pair Corralation between ProShares Investment and WisdomTree Interest

Given the investment horizon of 90 days ProShares Investment GradeInterest is expected to generate 0.95 times more return on investment than WisdomTree Interest. However, ProShares Investment GradeInterest is 1.05 times less risky than WisdomTree Interest. It trades about 0.01 of its potential returns per unit of risk. WisdomTree Interest Rate is currently generating about 0.0 per unit of risk. If you would invest  7,689  in ProShares Investment GradeInterest on December 10, 2024 and sell it today you would earn a total of  8.00  from holding ProShares Investment GradeInterest or generate 0.1% return on investment over 90 days.

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

ProShares Investment GradeInte  vs.  WisdomTree Interest Rate

ProShares Investment

Risk-Adjusted Performance

Very Weak

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

WisdomTree Interest Rate

Risk-Adjusted Performance

Weak

Over the last 90 days WisdomTree Interest Rate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, WisdomTree Interest is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ProShares Investment and WisdomTree Interest

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

The idea behind ProShares Investment GradeInterest and WisdomTree Interest Rate 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.