Correlation Between ProShares VIX and ProShares Trust

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

By analyzing existing cross correlation between ProShares VIX Mid Term and ProShares Trust , you can compare the effects of market volatilities on ProShares VIX and ProShares Trust 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 VIX with a short position of ProShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares VIX and ProShares Trust.

Diversification Opportunities for ProShares VIX and ProShares Trust

0.79

Correlation Coefficient

ProShares VIX  ProShares Trust

Poor diversification

The 3 months correlation between ProShares and ProShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ProShares VIX Mid Term and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust and ProShares VIX 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 VIX Mid Term are associated (or correlated) with ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of ProShares VIX i.e., ProShares VIX and ProShares Trust go up and down completely randomly.

Pair Corralation between ProShares VIX and ProShares Trust

Given the investment horizon of 90 days ProShares VIX Mid Term is expected to generate 0.53 times more return on investment than ProShares Trust. However, ProShares VIX Mid Term is 1.87 times less risky than ProShares Trust. It trades about -0.09 of its potential returns per unit of risk. ProShares Trust is currently generating about -0.24 per unit of risk. If you would invest  1,538  in ProShares VIX Mid Term on September 1, 2024 and sell it today you would lose (164.00) from holding ProShares VIX Mid Term or give up 10.66% of portfolio value over 90 days.

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

ProShares VIX Mid Term  vs.  ProShares Trust

ProShares VIX Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares VIX Mid Term has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

ProShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Pair Trading with ProShares VIX and ProShares Trust

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

The idea behind ProShares VIX Mid Term and ProShares Trust 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.