Correlation Between Dow Jones and ProShares Short
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and ProShares Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and ProShares Short MSCI, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ProShares Short.
Diversification Opportunities for Dow Jones and ProShares Short
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and ProShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ProShares Short MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short MSCI and Dow Jones 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 Dow Jones Industrial 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 MSCI has no effect on the direction of Dow Jones i.e., Dow Jones and ProShares Short go up and down completely randomly.
Pair Corralation between Dow Jones and ProShares Short
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.44 times less return on investment than ProShares Short. In addition to that, Dow Jones is 1.09 times more volatile than ProShares Short MSCI. It trades about 0.16 of its total potential returns per unit of risk. ProShares Short MSCI is currently generating about 0.25 per unit of volatility. If you would invest 1,528 in ProShares Short MSCI on August 30, 2024 and sell it today you would earn a total of 127.00 from holding ProShares Short MSCI or generate 8.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. ProShares Short MSCI
Performance |
| Timeline |
Dow Jones and ProShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
ProShares Short MSCI
Pair trading matchups for ProShares Short
Pair Trading with Dow Jones and ProShares Short
The main advantage of trading using opposite Dow Jones and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
| ProShares Short vs. ProShares Short MSCI | ProShares Short vs. ProShares UltraShort MSCI | ProShares Short vs. ProShares UltraShort MSCI | ProShares Short vs. ProShares Short MidCap400 |
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.
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