Correlation Between ProShares Merger and Overlay Shares

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

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

Diversification Opportunities for ProShares Merger and Overlay Shares

-0.17

Correlation Coefficient

ProShares Merger  Overlay Shares

Good diversification

The 3 months correlation between ProShares and Overlay is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Merger ETF and Overlay Shares Foreign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Foreign and ProShares Merger 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 Merger ETF are associated (or correlated) with Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Foreign has no effect on the direction of ProShares Merger i.e., ProShares Merger and Overlay Shares go up and down completely randomly.

Pair Corralation between ProShares Merger and Overlay Shares

Given the investment horizon of 90 days ProShares Merger is expected to generate 1.57 times less return on investment than Overlay Shares. But when comparing it to its historical volatility, ProShares Merger ETF is 4.22 times less risky than Overlay Shares. It trades about 0.14 of its potential returns per unit of risk. Overlay Shares Foreign is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,000  in Overlay Shares Foreign on October 27, 2024 and sell it today you would earn a total of  457.00  from holding Overlay Shares Foreign or generate 22.85% return on investment over 90 days.

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

ProShares Merger ETF  vs.  Overlay Shares Foreign

ProShares Merger ETF

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Merger ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, ProShares Merger is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Overlay Shares Foreign

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ProShares Merger and Overlay Shares

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

The idea behind ProShares Merger ETF and Overlay Shares Foreign 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.