Correlation Between ProShares Inflation and Cboe Vest

Can any of the company-specific risk be diversified away by investing in both ProShares Inflation and Cboe Vest 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 Cboe Vest 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 Cboe Vest 10, you can compare the effects of market volatilities on ProShares Inflation and Cboe Vest 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 Cboe Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Inflation and Cboe Vest.

Diversification Opportunities for ProShares Inflation and Cboe Vest

0.76

Correlation Coefficient

ProShares Inflation  Cboe Vest

Poor diversification

The 3 months correlation between ProShares and Cboe is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Inflation Expectatio and Cboe Vest 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cboe Vest 10 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 Cboe Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cboe Vest 10 has no effect on the direction of ProShares Inflation i.e., ProShares Inflation and Cboe Vest go up and down completely randomly.

Pair Corralation between ProShares Inflation and Cboe Vest

Given the investment horizon of 90 days ProShares Inflation Expectations is expected to generate 0.43 times more return on investment than Cboe Vest. However, ProShares Inflation Expectations is 2.33 times less risky than Cboe Vest. It trades about -0.01 of its potential returns per unit of risk. Cboe Vest 10 is currently generating about -0.04 per unit of risk. If you would invest  3,264  in ProShares Inflation Expectations on December 29, 2024 and sell it today you would lose (6.00) from holding ProShares Inflation Expectations or give up 0.18% of portfolio value over 90 days.

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

ProShares Inflation Expectatio  vs.  Cboe Vest 10

ProShares Inflation

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Inflation Expectations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ProShares Inflation is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Cboe Vest 10

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cboe Vest 10 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cboe Vest 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 Cboe Vest

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

The idea behind ProShares Inflation Expectations and Cboe Vest 10 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.