Correlation Between ProShares Smart and ProShares

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

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

Diversification Opportunities for ProShares Smart and ProShares

-0.6

Correlation Coefficient

ProShares Smart  ProShares

Excellent diversification

The 3 months correlation between ProShares and ProShares is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Smart Materials and ProShares SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP Kensho and ProShares Smart 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 Smart Materials are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP Kensho has no effect on the direction of ProShares Smart i.e., ProShares Smart and ProShares go up and down completely randomly.

Pair Corralation between ProShares Smart and ProShares

Given the investment horizon of 90 days ProShares Smart Materials is expected to under-perform the ProShares. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Smart Materials is 1.43 times less risky than ProShares. The etf trades about -0.04 of its potential returns per unit of risk. The ProShares SP Kensho is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,559  in ProShares SP Kensho on September 12, 2024 and sell it today you would earn a total of  661.40  from holding ProShares SP Kensho or generate 18.58% return on investment over 90 days.

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

ProShares Smart Materials  vs.  ProShares SP Kensho

ProShares Smart Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Smart Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ProShares Smart is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

ProShares SP Kensho

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP Kensho are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward-looking signals, ProShares showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Smart and ProShares

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

The idea behind ProShares Smart Materials and ProShares SP Kensho 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.