Correlation Between ProShares Online and Invesco Dynamic

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

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

Diversification Opportunities for ProShares Online and Invesco Dynamic

0.55

Correlation Coefficient

ProShares Online  Invesco Dynamic

Very weak diversification

The 3 months correlation between ProShares and Invesco is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Online Retail and Invesco Dynamic Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Leisure and ProShares Online 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 Online Retail are associated (or correlated) with Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Leisure has no effect on the direction of ProShares Online i.e., ProShares Online and Invesco Dynamic go up and down completely randomly.

Pair Corralation between ProShares Online and Invesco Dynamic

Given the investment horizon of 90 days ProShares Online Retail is expected to generate 1.02 times more return on investment than Invesco Dynamic. However, ProShares Online is 1.02 times more volatile than Invesco Dynamic Leisure. It trades about -0.02 of its potential returns per unit of risk. Invesco Dynamic Leisure is currently generating about -0.07 per unit of risk. If you would invest  4,615  in ProShares Online Retail on September 25, 2024 and sell it today you would lose (29.00) from holding ProShares Online Retail or give up 0.63% of portfolio value over 90 days.

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

ProShares Online Retail  vs.  Invesco Dynamic Leisure

ProShares Online Retail

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Online Retail are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, ProShares Online is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Invesco Dynamic Leisure

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Leisure are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Invesco Dynamic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ProShares Online and Invesco Dynamic

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

The idea behind ProShares Online Retail and Invesco Dynamic Leisure 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 Correlations module to find global opportunities by holding instruments from different markets.