Correlation Between ProShares Supply and Defiance Hotel

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

By analyzing existing cross correlation between ProShares Supply Chain and Defiance Hotel Airline, you can compare the effects of market volatilities on ProShares Supply and Defiance Hotel 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 Supply with a short position of Defiance Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Supply and Defiance Hotel.

Diversification Opportunities for ProShares Supply and Defiance Hotel

0.63

Correlation Coefficient

ProShares Supply  Defiance Hotel

Poor diversification

The 3 months correlation between ProShares and Defiance is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Supply Chain and Defiance Hotel Airline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Hotel Airline and ProShares Supply 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 Supply Chain are associated (or correlated) with Defiance Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Hotel Airline has no effect on the direction of ProShares Supply i.e., ProShares Supply and Defiance Hotel go up and down completely randomly.

Pair Corralation between ProShares Supply and Defiance Hotel

Given the investment horizon of 90 days ProShares Supply Chain is expected to generate 0.7 times more return on investment than Defiance Hotel. However, ProShares Supply Chain is 1.44 times less risky than Defiance Hotel. It trades about -0.04 of its potential returns per unit of risk. Defiance Hotel Airline is currently generating about -0.13 per unit of risk. If you would invest  3,781  in ProShares Supply Chain on December 23, 2024 and sell it today you would lose (101.00) from holding ProShares Supply Chain or give up 2.67% of portfolio value over 90 days.

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

ProShares Supply Chain  vs.  Defiance Hotel Airline

ProShares Supply Chain

Risk-Adjusted Performance

Very Weak

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

Defiance Hotel Airline

Risk-Adjusted Performance

Very Weak

Over the last 90 days Defiance Hotel Airline has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with ProShares Supply and Defiance Hotel

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

The idea behind ProShares Supply Chain and Defiance Hotel Airline 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.