Correlation Between WisdomTree Managed and ProShares Short

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

By analyzing existing cross correlation between WisdomTree Managed Futures and ProShares Short SmallCap600, you can compare the effects of market volatilities on WisdomTree Managed and ProShares Short 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 WisdomTree Managed with a short position of ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Managed and ProShares Short.

Diversification Opportunities for WisdomTree Managed and ProShares Short

-0.96

Correlation Coefficient

WisdomTree Managed  ProShares Short

Pay attention - limited upside

The 3 months correlation between WisdomTree and ProShares is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Managed Futures and ProShares Short SmallCap600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short Smal and WisdomTree Managed 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 WisdomTree Managed Futures are associated (or correlated) with ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short Smal has no effect on the direction of WisdomTree Managed i.e., WisdomTree Managed and ProShares Short go up and down completely randomly.

Pair Corralation between WisdomTree Managed and ProShares Short

Given the investment horizon of 90 days WisdomTree Managed Futures is expected to under-perform the ProShares Short. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree Managed Futures is 2.03 times less risky than ProShares Short. The etf trades about -0.07 of its potential returns per unit of risk. The ProShares Short SmallCap600 is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,455  in ProShares Short SmallCap600 on December 21, 2024 and sell it today you would earn a total of  154.00  from holding ProShares Short SmallCap600 or generate 10.58% return on investment over 90 days.

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

WisdomTree Managed Futures  vs.  ProShares Short SmallCap600

WisdomTree Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Managed Futures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, WisdomTree Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ProShares Short Smal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Short SmallCap600 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, ProShares Short may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with WisdomTree Managed and ProShares Short

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

The idea behind WisdomTree Managed Futures and ProShares Short SmallCap600 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.