Correlation Between ProShares and FlexShares Morningstar

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

By analyzing existing cross correlation between ProShares DJ Brookfield and FlexShares Morningstar Global, you can compare the effects of market volatilities on ProShares and FlexShares Morningstar 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 FlexShares Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and FlexShares Morningstar.

Diversification Opportunities for ProShares and FlexShares Morningstar

0.43

Correlation Coefficient

ProShares  FlexShares Morningstar

Very weak diversification

The 3 months correlation between ProShares and FlexShares is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding ProShares DJ Brookfield and FlexShares Morningstar Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Morningstar 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 DJ Brookfield are associated (or correlated) with FlexShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Morningstar has no effect on the direction of ProShares i.e., ProShares and FlexShares Morningstar go up and down completely randomly.

Pair Corralation between ProShares and FlexShares Morningstar

Given the investment horizon of 90 days ProShares DJ Brookfield is expected to generate 0.89 times more return on investment than FlexShares Morningstar. However, ProShares DJ Brookfield is 1.13 times less risky than FlexShares Morningstar. It trades about -0.17 of its potential returns per unit of risk. FlexShares Morningstar Global is currently generating about -0.3 per unit of risk. If you would invest  5,069  in ProShares DJ Brookfield on October 9, 2024 and sell it today you would lose (141.00) from holding ProShares DJ Brookfield or give up 2.78% of portfolio value over 90 days.

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

ProShares DJ Brookfield  vs.  FlexShares Morningstar Global

ProShares DJ Brookfield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares DJ Brookfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, ProShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FlexShares Morningstar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares Morningstar Global has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with ProShares and FlexShares Morningstar

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

The idea behind ProShares DJ Brookfield and FlexShares Morningstar Global 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.