Correlation Between VanEck Agribusiness and ProShares Smart

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

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

Diversification Opportunities for VanEck Agribusiness and ProShares Smart

0.94

Correlation Coefficient

VanEck Agribusiness  ProShares Smart

Almost no diversification

The 3 months correlation between VanEck and ProShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Agribusiness ETF and ProShares Smart Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Smart Materials and VanEck Agribusiness 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 VanEck Agribusiness ETF are associated (or correlated) with ProShares Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Smart Materials has no effect on the direction of VanEck Agribusiness i.e., VanEck Agribusiness and ProShares Smart go up and down completely randomly.

Pair Corralation between VanEck Agribusiness and ProShares Smart

Considering the 90-day investment horizon VanEck Agribusiness ETF is expected to generate 0.86 times more return on investment than ProShares Smart. However, VanEck Agribusiness ETF is 1.16 times less risky than ProShares Smart. It trades about 0.38 of its potential returns per unit of risk. ProShares Smart Materials is currently generating about 0.31 per unit of risk. If you would invest  6,408  in VanEck Agribusiness ETF on October 20, 2024 and sell it today you would earn a total of  356.00  from holding VanEck Agribusiness ETF or generate 5.56% return on investment over 90 days.

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

VanEck Agribusiness ETF  vs.  ProShares Smart Materials

VanEck Agribusiness ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Agribusiness ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, VanEck Agribusiness is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

ProShares Smart Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Smart Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with VanEck Agribusiness and ProShares Smart

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

The idea behind VanEck Agribusiness ETF and ProShares Smart Materials 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.