Correlation Between ProShares Metaverse and Invesco DWA

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

By analyzing existing cross correlation between ProShares Metaverse ETF and Invesco DWA Utilities, you can compare the effects of market volatilities on ProShares Metaverse and Invesco DWA 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 Metaverse with a short position of Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Metaverse and Invesco DWA.

Diversification Opportunities for ProShares Metaverse and Invesco DWA

0.59

Correlation Coefficient

ProShares Metaverse  Invesco DWA

Very weak diversification

The 3 months correlation between ProShares and Invesco is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Metaverse ETF and Invesco DWA Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Utilities and ProShares Metaverse 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 Metaverse ETF are associated (or correlated) with Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Utilities has no effect on the direction of ProShares Metaverse i.e., ProShares Metaverse and Invesco DWA go up and down completely randomly.

Pair Corralation between ProShares Metaverse and Invesco DWA

Given the investment horizon of 90 days ProShares Metaverse ETF is expected to generate 1.56 times more return on investment than Invesco DWA. However, ProShares Metaverse is 1.56 times more volatile than Invesco DWA Utilities. It trades about 0.08 of its potential returns per unit of risk. Invesco DWA Utilities is currently generating about 0.05 per unit of risk. If you would invest  2,787  in ProShares Metaverse ETF on September 12, 2024 and sell it today you would earn a total of  2,161  from holding ProShares Metaverse ETF or generate 77.53% return on investment over 90 days.

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

ProShares Metaverse ETF  vs.  Invesco DWA Utilities

ProShares Metaverse ETF

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Metaverse ETF are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, ProShares Metaverse unveiled solid returns over the last few months and may actually be approaching a breakup point.

Invesco DWA Utilities

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DWA Utilities are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Invesco DWA is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ProShares Metaverse and Invesco DWA

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

The idea behind ProShares Metaverse ETF and Invesco DWA Utilities 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.