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

0.51

Correlation Coefficient

ProShares Supply  Invesco DWA

Very weak diversification

The 3 months correlation between ProShares and Invesco is 0.51. 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 generate 0.95 times more return on investment than Invesco DWA. However, ProShares Supply Chain is 1.05 times less risky than Invesco DWA. It trades about 0.03 of its potential returns per unit of risk. Invesco DWA Utilities is currently generating about 0.0 per unit of risk. If you would invest  3,709  in ProShares Supply Chain on December 5, 2024 and sell it today you would earn a total of  18.50  from holding ProShares Supply Chain or generate 0.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
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 latest uncertain performance, the Etf's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Invesco DWA Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco DWA Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.