Correlation Between ProShares and WisdomTree Trust
Can any of the company-specific risk be diversified away by investing in both ProShares and WisdomTree Trust 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 and WisdomTree Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares SP 500 and WisdomTree Trust , you can compare the effects of market volatilities on ProShares and WisdomTree Trust 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 with a short position of WisdomTree Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and WisdomTree Trust.
Diversification Opportunities for ProShares and WisdomTree Trust
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and WisdomTree is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP 500 and WisdomTree Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Trust and ProShares 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 SP 500 are associated (or correlated) with WisdomTree Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Trust has no effect on the direction of ProShares i.e., ProShares and WisdomTree Trust go up and down completely randomly.
Pair Corralation between ProShares and WisdomTree Trust
Given the investment horizon of 90 days ProShares is expected to generate 3.22 times less return on investment than WisdomTree Trust. But when comparing it to its historical volatility, ProShares SP 500 is 1.47 times less risky than WisdomTree Trust. It trades about 0.12 of its potential returns per unit of risk. WisdomTree Trust is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 7,672 in WisdomTree Trust on August 28, 2024 and sell it today you would earn a total of 1,219 from holding WisdomTree Trust or generate 15.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares SP 500 vs. WisdomTree Trust
Performance |
| Timeline |
| ProShares SP 500 |
| WisdomTree Trust |
ProShares and WisdomTree Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares and WisdomTree Trust
The main advantage of trading using opposite ProShares and WisdomTree Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares position performs unexpectedly, WisdomTree Trust 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 WisdomTree Trust will offset losses from the drop in WisdomTree Trust's long position.| ProShares vs. BlackRock ETF Trust | ProShares vs. Rbb Fund | ProShares vs. Virtus ETF Trust | ProShares vs. Amplify CWP Enhanced |
| WisdomTree Trust vs. BlackRock ETF Trust | WisdomTree Trust vs. Rbb Fund | WisdomTree Trust vs. Virtus ETF Trust | WisdomTree Trust vs. Amplify CWP Enhanced |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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