Correlation Between ProShares and ProShares MSCI

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

By analyzing existing cross correlation between ProShares SP Technology and ProShares MSCI Europe, you can compare the effects of market volatilities on ProShares and ProShares MSCI 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 with a short position of ProShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and ProShares MSCI.

Diversification Opportunities for ProShares and ProShares MSCI

-0.29

Correlation Coefficient

ProShares  ProShares MSCI

Very good diversification

The 3 months correlation between ProShares and ProShares is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP Technology and ProShares MSCI Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares MSCI Europe and ProShares 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 SP Technology are associated (or correlated) with ProShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares MSCI Europe has no effect on the direction of ProShares i.e., ProShares and ProShares MSCI go up and down completely randomly.

Pair Corralation between ProShares and ProShares MSCI

Considering the 90-day investment horizon ProShares SP Technology is expected to generate 1.3 times more return on investment than ProShares MSCI. However, ProShares is 1.3 times more volatile than ProShares MSCI Europe. It trades about 0.23 of its potential returns per unit of risk. ProShares MSCI Europe is currently generating about 0.1 per unit of risk. If you would invest  7,592  in ProShares SP Technology on September 18, 2024 and sell it today you would earn a total of  245.00  from holding ProShares SP Technology or generate 3.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

ProShares SP Technology  vs.  ProShares MSCI Europe

ProShares SP Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, ProShares is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ProShares MSCI Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares MSCI Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with ProShares and ProShares MSCI

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

The idea behind ProShares SP Technology and ProShares MSCI Europe 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.