Correlation Between ProShares VIX and ProShares VIX

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

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

Diversification Opportunities for ProShares VIX and ProShares VIX

0.93

Correlation Coefficient

ProShares VIX  ProShares VIX

Almost no diversification

The 3 months correlation between ProShares and ProShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding ProShares VIX Short Term and ProShares VIX Mid Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares VIX Mid 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 Short Term are associated (or correlated) with ProShares VIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares VIX Mid has no effect on the direction of ProShares VIX i.e., ProShares VIX and ProShares VIX go up and down completely randomly.

Pair Corralation between ProShares VIX and ProShares VIX

Given the investment horizon of 90 days ProShares VIX Short Term is expected to generate 2.22 times more return on investment than ProShares VIX. However, ProShares VIX is 2.22 times more volatile than ProShares VIX Mid Term. It trades about 0.07 of its potential returns per unit of risk. ProShares VIX Mid Term is currently generating about 0.08 per unit of risk. If you would invest  4,473  in ProShares VIX Short Term on December 30, 2024 and sell it today you would earn a total of  575.00  from holding ProShares VIX Short Term or generate 12.85% return on investment over 90 days.

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

ProShares VIX Short Term  vs.  ProShares VIX Mid Term

ProShares VIX Short

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares VIX Short Term are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, ProShares VIX showed solid returns over the last few months and may actually be approaching a breakup point.

ProShares VIX Mid

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares VIX Mid Term are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, ProShares VIX may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ProShares VIX and ProShares VIX

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

The idea behind ProShares VIX Short Term and ProShares VIX Mid Term 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.