Correlation Between Principal Quality and ProShares Equities

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

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

Diversification Opportunities for Principal Quality and ProShares Equities

0.84

Correlation Coefficient

Principal Quality  ProShares Equities

Very poor diversification

The 3 months correlation between Principal and ProShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Principal Quality ETF and ProShares Equities for in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Equities for and Principal 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 Principal Quality ETF are associated (or correlated) with ProShares Equities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Equities for has no effect on the direction of Principal Quality i.e., Principal Quality and ProShares Equities go up and down completely randomly.

Pair Corralation between Principal Quality and ProShares Equities

Given the investment horizon of 90 days Principal Quality ETF is expected to generate 0.94 times more return on investment than ProShares Equities. However, Principal Quality ETF is 1.07 times less risky than ProShares Equities. It trades about 0.15 of its potential returns per unit of risk. ProShares Equities for is currently generating about 0.11 per unit of risk. If you would invest  6,829  in Principal Quality ETF on September 12, 2024 and sell it today you would earn a total of  574.00  from holding Principal Quality ETF or generate 8.41% return on investment over 90 days.

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

Principal Quality ETF  vs.  ProShares Equities for

Principal Quality ETF

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Quality ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Principal Quality may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ProShares Equities for

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Equities for are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, ProShares Equities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Principal Quality and ProShares Equities

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

The idea behind Principal Quality ETF and ProShares Equities for 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..