Correlation Between ProShares MSCI and ProShares MSCI

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Can any of the company-specific risk be diversified away by investing in both ProShares MSCI and ProShares MSCI 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 MSCI and ProShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares MSCI Emerging and ProShares MSCI EAFE, you can compare the effects of market volatilities on ProShares MSCI and ProShares MSCI 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 MSCI with a short position of ProShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares MSCI and ProShares MSCI.

Diversification Opportunities for ProShares MSCI and ProShares MSCI

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between ProShares and ProShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ProShares MSCI Emerging and ProShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares MSCI EAFE and ProShares MSCI 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 MSCI Emerging are associated (or correlated) with ProShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares MSCI EAFE has no effect on the direction of ProShares MSCI i.e., ProShares MSCI and ProShares MSCI go up and down completely randomly.

Pair Corralation between ProShares MSCI and ProShares MSCI

Given the investment horizon of 90 days ProShares MSCI Emerging is expected to under-perform the ProShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, ProShares MSCI Emerging is 1.03 times less risky than ProShares MSCI. The etf trades about -0.14 of its potential returns per unit of risk. The ProShares MSCI EAFE is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,712  in ProShares MSCI EAFE on October 24, 2024 and sell it today you would earn a total of  49.50  from holding ProShares MSCI EAFE or generate 1.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

ProShares MSCI Emerging  vs.  ProShares MSCI EAFE

 Performance 
       Timeline  
ProShares MSCI Emerging 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ProShares MSCI Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.
ProShares MSCI EAFE 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ProShares MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ProShares MSCI is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares MSCI and ProShares MSCI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares MSCI and ProShares MSCI

The main advantage of trading using opposite ProShares MSCI and ProShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares MSCI position performs unexpectedly, ProShares MSCI 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 MSCI will offset losses from the drop in ProShares MSCI's long position.
The idea behind ProShares MSCI Emerging and ProShares MSCI EAFE 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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