Correlation Between ProShares Supply and Invesco DWA

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

Diversification Opportunities for ProShares Supply and Invesco DWA

0.05

Correlation Coefficient

ProShares Supply  Invesco DWA

Significant diversification

The 3 months correlation between ProShares and Invesco is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Supply Chain and Invesco DWA Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Utilities 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 Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Utilities has no effect on the direction of ProShares Supply i.e., ProShares Supply and Invesco DWA go up and down completely randomly.

Pair Corralation between ProShares Supply and Invesco DWA

Given the investment horizon of 90 days ProShares Supply Chain is expected to under-perform the Invesco DWA. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Supply Chain is 1.09 times less risky than Invesco DWA. The etf trades about -0.02 of its potential returns per unit of risk. The Invesco DWA Utilities is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,849  in Invesco DWA Utilities on December 28, 2024 and sell it today you would earn a total of  203.00  from holding Invesco DWA Utilities or generate 5.27% return on investment over 90 days.

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

ProShares Supply Chain  vs.  Invesco DWA Utilities

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.

Invesco DWA Utilities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Utilities are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Invesco DWA is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ProShares Supply and Invesco DWA

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

The idea behind ProShares Supply Chain and Invesco DWA Utilities 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.