Correlation Between ProShares and Dimensional Targeted

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

By analyzing existing cross correlation between ProShares SP MidCap and Dimensional Targeted Value, you can compare the effects of market volatilities on ProShares and Dimensional Targeted 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 Dimensional Targeted. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and Dimensional Targeted.

Diversification Opportunities for ProShares and Dimensional Targeted

0.91

Correlation Coefficient

ProShares  Dimensional Targeted

Almost no diversification

The 3 months correlation between ProShares and Dimensional is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP MidCap and Dimensional Targeted Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Targeted 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 MidCap are associated (or correlated) with Dimensional Targeted. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Targeted has no effect on the direction of ProShares i.e., ProShares and Dimensional Targeted go up and down completely randomly.

Pair Corralation between ProShares and Dimensional Targeted

Given the investment horizon of 90 days ProShares is expected to generate 1.54 times less return on investment than Dimensional Targeted. But when comparing it to its historical volatility, ProShares SP MidCap is 1.31 times less risky than Dimensional Targeted. It trades about 0.04 of its potential returns per unit of risk. Dimensional Targeted Value is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,285  in Dimensional Targeted Value on September 26, 2024 and sell it today you would earn a total of  1,322  from holding Dimensional Targeted Value or generate 30.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

ProShares SP MidCap  vs.  Dimensional Targeted Value

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.

Dimensional Targeted

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional Targeted Value are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Dimensional Targeted is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ProShares and Dimensional Targeted

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

The idea behind ProShares SP MidCap and Dimensional Targeted Value 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.