Correlation Between FlexShares STOXX and ProShares

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

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

Diversification Opportunities for FlexShares STOXX and ProShares

0.19

Correlation Coefficient

FlexShares STOXX  ProShares

Average diversification

The 3 months correlation between FlexShares and ProShares is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX Global and ProShares DJ Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares DJ Brookfield and FlexShares STOXX 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 FlexShares STOXX Global are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares DJ Brookfield has no effect on the direction of FlexShares STOXX i.e., FlexShares STOXX and ProShares go up and down completely randomly.

Pair Corralation between FlexShares STOXX and ProShares

Given the investment horizon of 90 days FlexShares STOXX Global is expected to under-perform the ProShares. But the etf apears to be less risky and, when comparing its historical volatility, FlexShares STOXX Global is 1.31 times less risky than ProShares. The etf trades about -0.12 of its potential returns per unit of risk. The ProShares DJ Brookfield is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,019  in ProShares DJ Brookfield on September 13, 2024 and sell it today you would earn a total of  20.00  from holding ProShares DJ Brookfield or generate 0.4% return on investment over 90 days.

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

FlexShares STOXX Global  vs.  ProShares DJ Brookfield

FlexShares STOXX Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares STOXX Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FlexShares STOXX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ProShares DJ Brookfield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares DJ Brookfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, ProShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FlexShares STOXX and ProShares

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

The idea behind FlexShares STOXX Global and ProShares DJ Brookfield 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.