Correlation Between WisdomTree Emerging and ProShares Large
Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and ProShares Large 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 Emerging and ProShares Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Emerging Currency and ProShares Large Cap, you can compare the effects of market volatilities on WisdomTree Emerging and ProShares Large 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 Emerging with a short position of ProShares Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and ProShares Large.
Diversification Opportunities for WisdomTree Emerging and ProShares Large
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WisdomTree and ProShares is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Currency and ProShares Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Large Cap and WisdomTree Emerging 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 Emerging Currency are associated (or correlated) with ProShares Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Large Cap has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and ProShares Large go up and down completely randomly.
Pair Corralation between WisdomTree Emerging and ProShares Large
Considering the 90-day investment horizon WisdomTree Emerging is expected to generate 5.09 times less return on investment than ProShares Large. But when comparing it to its historical volatility, WisdomTree Emerging Currency is 2.13 times less risky than ProShares Large. It trades about 0.06 of its potential returns per unit of risk. ProShares Large Cap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 4,910 in ProShares Large Cap on September 4, 2024 and sell it today you would earn a total of 1,947 from holding ProShares Large Cap or generate 39.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.31% |
| Values | Daily Returns |
WisdomTree Emerging Currency vs. ProShares Large Cap
Performance |
| Timeline |
| WisdomTree Emerging |
| ProShares Large Cap |
WisdomTree Emerging and ProShares Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Emerging and ProShares Large
The main advantage of trading using opposite WisdomTree Emerging and ProShares Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging position performs unexpectedly, ProShares Large 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 Large will offset losses from the drop in ProShares Large's long position.The idea behind WisdomTree Emerging Currency and ProShares Large Cap 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.
| ProShares Large vs. ProShares Hedge Replication | ProShares Large vs. ProShares Ultra MSCI | ProShares Large vs. ProShares Ultra Consumer | ProShares Large vs. ProShares Ultra Consumer |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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