Correlation Between ProShares Smart and JPMorgan Climate

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

Diversification Opportunities for ProShares Smart and JPMorgan Climate

0.7

Correlation Coefficient

ProShares Smart  JPMorgan Climate

Poor diversification

The 3 months correlation between ProShares and JPMorgan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Smart Materials and JPMorgan Climate Change in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Climate Change 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 JPMorgan Climate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Climate Change has no effect on the direction of ProShares Smart i.e., ProShares Smart and JPMorgan Climate go up and down completely randomly.

Pair Corralation between ProShares Smart and JPMorgan Climate

Given the investment horizon of 90 days ProShares Smart Materials is expected to generate 1.12 times more return on investment than JPMorgan Climate. However, ProShares Smart is 1.12 times more volatile than JPMorgan Climate Change. It trades about -0.01 of its potential returns per unit of risk. JPMorgan Climate Change is currently generating about -0.04 per unit of risk. If you would invest  2,918  in ProShares Smart Materials on December 27, 2024 and sell it today you would lose (31.90) from holding ProShares Smart Materials or give up 1.09% of portfolio value over 90 days.

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

ProShares Smart Materials  vs.  JPMorgan Climate Change

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.

JPMorgan Climate Change

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPMorgan Climate Change has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, JPMorgan Climate is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ProShares Smart and JPMorgan Climate

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

The idea behind ProShares Smart Materials and JPMorgan Climate Change 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.