Correlation Between IShares Trust and ProShares Trust

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

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

Diversification Opportunities for IShares Trust and ProShares Trust

0.95

Correlation Coefficient

IShares Trust  ProShares Trust

Almost no diversification

The 3 months correlation between IShares and ProShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust and IShares Trust 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 Trust are associated (or correlated) with ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of IShares Trust i.e., IShares Trust and ProShares Trust go up and down completely randomly.

Pair Corralation between IShares Trust and ProShares Trust

Assuming the 90 days trading horizon IShares Trust is expected to generate 5.4 times less return on investment than ProShares Trust. But when comparing it to its historical volatility, iShares Trust is 1.69 times less risky than ProShares Trust. It trades about 0.12 of its potential returns per unit of risk. ProShares Trust is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest  209,422  in ProShares Trust on September 16, 2024 and sell it today you would earn a total of  24,378  from holding ProShares Trust or generate 11.64% return on investment over 90 days.

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

iShares Trust   vs.  ProShares Trust

iShares Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, IShares Trust showed solid returns over the last few months and may actually be approaching a breakup point.

ProShares Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, ProShares Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Trust and ProShares Trust

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

The idea behind iShares Trust and ProShares Trust 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.