Correlation Between ProShares and 6 Meridian

Can any of the company-specific risk be diversified away by investing in both ProShares and 6 Meridian 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 and 6 Meridian into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProShares SP 500 and 6 Meridian Mega, you can compare the effects of market volatilities on ProShares and 6 Meridian 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 with a short position of 6 Meridian. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and 6 Meridian.

Diversification Opportunities for ProShares and 6 Meridian

0.79

Correlation Coefficient

ProShares  6 Meridian

Poor diversification

The 3 months correlation between ProShares and SIXA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP 500 and 6 Meridian Mega in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 6 Meridian Mega and ProShares 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 SP 500 are associated (or correlated) with 6 Meridian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 6 Meridian Mega has no effect on the direction of ProShares i.e., ProShares and 6 Meridian go up and down completely randomly.

Pair Corralation between ProShares and 6 Meridian

Given the investment horizon of 90 days ProShares is expected to generate 1.87 times less return on investment than 6 Meridian. In addition to that, ProShares is 1.07 times more volatile than 6 Meridian Mega. It trades about 0.08 of its total potential returns per unit of risk. 6 Meridian Mega is currently generating about 0.17 per unit of volatility. If you would invest  3,606  in 6 Meridian Mega on September 12, 2024 and sell it today you would earn a total of  974.00  from holding 6 Meridian Mega or generate 27.01% return on investment over 90 days.

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

ProShares SP 500  vs.  6 Meridian Mega

ProShares SP 500

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP 500 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, ProShares is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

6 Meridian Mega

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 6 Meridian Mega are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 6 Meridian is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares and 6 Meridian

The main advantage of trading using opposite ProShares and 6 Meridian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares position performs unexpectedly, 6 Meridian 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 6 Meridian will offset losses from the drop in 6 Meridian's long position.

The idea behind ProShares SP 500 and 6 Meridian Mega 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.