Correlation Between IShares Core and ProShares Nasdaq

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

By analyzing existing cross correlation between iShares Core SP and ProShares Nasdaq 100 Dorsey, you can compare the effects of market volatilities on IShares Core and ProShares Nasdaq 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 Core with a short position of ProShares Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and ProShares Nasdaq.

Diversification Opportunities for IShares Core and ProShares Nasdaq

0.89

Correlation Coefficient

IShares Core  ProShares Nasdaq

Very poor diversification

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 Core SP and ProShares Nasdaq 100 Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Nasdaq 100 and IShares Core 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 Core SP are associated (or correlated) with ProShares Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Nasdaq 100 has no effect on the direction of IShares Core i.e., IShares Core and ProShares Nasdaq go up and down completely randomly.

Pair Corralation between IShares Core and ProShares Nasdaq

Given the investment horizon of 90 days iShares Core SP is expected to generate 0.7 times more return on investment than ProShares Nasdaq. However, iShares Core SP is 1.43 times less risky than ProShares Nasdaq. It trades about -0.1 of its potential returns per unit of risk. ProShares Nasdaq 100 Dorsey is currently generating about -0.07 per unit of risk. If you would invest  14,222  in iShares Core SP on December 21, 2024 and sell it today you would lose (1,213) from holding iShares Core SP or give up 8.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

iShares Core SP  vs.  ProShares Nasdaq 100 Dorsey

iShares Core SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

ProShares Nasdaq 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Nasdaq 100 Dorsey has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with IShares Core and ProShares Nasdaq

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

The idea behind iShares Core SP and ProShares Nasdaq 100 Dorsey 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.