Correlation Between ProShares and IShares Global

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

Diversification Opportunities for ProShares and IShares Global

0.84

Correlation Coefficient

ProShares  IShares Global

Very poor diversification

The 3 months correlation between ProShares and IShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ProShares DJ Brookfield and iShares Global Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Infra 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 IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Infra has no effect on the direction of ProShares i.e., ProShares and IShares Global go up and down completely randomly.

Pair Corralation between ProShares and IShares Global

Given the investment horizon of 90 days ProShares DJ Brookfield is expected to under-perform the IShares Global. But the etf apears to be less risky and, when comparing its historical volatility, ProShares DJ Brookfield is 1.07 times less risky than IShares Global. The etf trades about -0.03 of its potential returns per unit of risk. The iShares Global Infrastructure is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,378  in iShares Global Infrastructure on September 16, 2024 and sell it today you would lose (27.00) from holding iShares Global Infrastructure or give up 0.5% of portfolio value over 90 days.

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

ProShares DJ Brookfield  vs.  iShares Global Infrastructure

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 latest stock price disturbance, may contribute to short-term losses for the investors.

iShares Global Infra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IShares Global is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ProShares and IShares Global

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

The idea behind ProShares DJ Brookfield and iShares Global Infrastructure 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.

Check out your portfolio center.

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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.