Correlation Between ProShares Inflation and ETF Series

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

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

Diversification Opportunities for ProShares Inflation and ETF Series

0.77

Correlation Coefficient

ProShares Inflation  ETF Series

Poor diversification

The 3 months correlation between ProShares and ETF is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Inflation Expectatio and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions and ProShares Inflation 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 Inflation Expectations are associated (or correlated) with ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of ProShares Inflation i.e., ProShares Inflation and ETF Series go up and down completely randomly.

Pair Corralation between ProShares Inflation and ETF Series

Given the investment horizon of 90 days ProShares Inflation Expectations is expected to generate 0.4 times more return on investment than ETF Series. However, ProShares Inflation Expectations is 2.52 times less risky than ETF Series. It trades about 0.02 of its potential returns per unit of risk. ETF Series Solutions is currently generating about -0.09 per unit of risk. If you would invest  3,264  in ProShares Inflation Expectations on December 28, 2024 and sell it today you would earn a total of  11.00  from holding ProShares Inflation Expectations or generate 0.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

ProShares Inflation Expectatio  vs.  ETF Series Solutions

ProShares Inflation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Inflation Expectations are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ProShares Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ETF Series Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETF Series Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, ETF Series is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ProShares Inflation and ETF Series

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

The idea behind ProShares Inflation Expectations and ETF Series Solutions 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.