Correlation Between Dimensional International and ProShares Short
Can any of the company-specific risk be diversified away by investing in both Dimensional International 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 Dimensional International and ProShares Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimensional International High and ProShares Short SP500, you can compare the effects of market volatilities on Dimensional International 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 Dimensional International with a short position of ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and ProShares Short.
Diversification Opportunities for Dimensional International and ProShares Short
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dimensional and ProShares is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International High and ProShares Short SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short SP500 and Dimensional International 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 Dimensional International High 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 SP500 has no effect on the direction of Dimensional International i.e., Dimensional International and ProShares Short go up and down completely randomly.
Pair Corralation between Dimensional International and ProShares Short
Given the investment horizon of 90 days Dimensional International High is expected to generate 1.05 times more return on investment than ProShares Short. However, Dimensional International is 1.05 times more volatile than ProShares Short SP500. It trades about 0.01 of its potential returns per unit of risk. ProShares Short SP500 is currently generating about -0.09 per unit of risk. If you would invest 2,544 in Dimensional International High on August 29, 2024 and sell it today you would earn a total of 28.00 from holding Dimensional International High or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dimensional International High vs. ProShares Short SP500
Performance |
| Timeline |
| Dimensional International |
| ProShares Short SP500 |
Dimensional International and ProShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dimensional International and ProShares Short
The main advantage of trading using opposite Dimensional International and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International 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 Dimensional International High and ProShares Short SP500 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 Short vs. ProShares Short QQQ | ProShares Short vs. ProShares Short Dow30 | ProShares Short vs. ProShares UltraShort SP500 | ProShares Short vs. ProShares Short Russell2000 |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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