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 On Demand ETF, 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

0.46

Correlation Coefficient

ProShares Smart  ProShares

Very weak diversification

The 3 months correlation between ProShares and ProShares is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Smart Materials and ProShares On Demand ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares On Demand 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 On Demand 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 is expected to generate 2.32 times less return on investment than ProShares. But when comparing it to its historical volatility, ProShares Smart Materials is 1.15 times less risky than ProShares. It trades about 0.01 of its potential returns per unit of risk. ProShares On Demand ETF is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,350  in ProShares On Demand ETF on December 24, 2024 and sell it today you would earn a total of  43.70  from holding ProShares On Demand ETF or generate 1.3% return on investment over 90 days.

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

ProShares Smart Materials  vs.  ProShares On Demand ETF

ProShares Smart Materials

Risk-Adjusted Performance

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

ProShares On Demand

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares On Demand ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ProShares is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 On Demand ETF 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.