Correlation Between OShares Quality and ProShares

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

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

Diversification Opportunities for OShares Quality and ProShares

0.82

Correlation Coefficient

OShares Quality  ProShares

Very poor diversification

The 3 months correlation between OShares and ProShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding OShares Quality Dividend and ProShares SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP MidCap and OShares Quality 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 OShares Quality Dividend 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 SP MidCap has no effect on the direction of OShares Quality i.e., OShares Quality and ProShares go up and down completely randomly.

Pair Corralation between OShares Quality and ProShares

Given the investment horizon of 90 days OShares Quality is expected to generate 1.38 times less return on investment than ProShares. But when comparing it to its historical volatility, OShares Quality Dividend is 1.45 times less risky than ProShares. It trades about 0.1 of its potential returns per unit of risk. ProShares SP MidCap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,209  in ProShares SP MidCap on September 29, 2024 and sell it today you would earn a total of  875.00  from holding ProShares SP MidCap or generate 12.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.21%
Values	Daily Returns

OShares Quality Dividend  vs.  ProShares SP MidCap

OShares Quality Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

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

ProShares SP MidCap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares SP MidCap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, ProShares is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with OShares Quality and ProShares

The main advantage of trading using opposite OShares Quality and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OShares Quality 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 OShares Quality Dividend and ProShares SP MidCap 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.