Correlation Between ProShares and Dow Jones
Can any of the company-specific risk be diversified away by investing in both ProShares and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares On Demand ETF and Dow Jones Industrial, you can compare the effects of market volatilities on ProShares and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and Dow Jones.
Diversification Opportunities for ProShares and Dow Jones
Very poor diversification
The 3 months correlation between ProShares and Dow is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ProShares On Demand ETF and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 On Demand ETF are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of ProShares i.e., ProShares and Dow Jones go up and down completely randomly.
Pair Corralation between ProShares and Dow Jones
Considering the 90-day investment horizon ProShares is expected to generate 1.66 times less return on investment than Dow Jones. In addition to that, ProShares is 1.15 times more volatile than Dow Jones Industrial. It trades about 0.14 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of volatility. If you would invest 4,223,305 in Dow Jones Industrial on August 30, 2024 and sell it today you would earn a total of 248,901 from holding Dow Jones Industrial or generate 5.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares On Demand ETF vs. Dow Jones Industrial
Performance |
| Timeline |
ProShares and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
ProShares On Demand ETF
Pair trading matchups for ProShares
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with ProShares and Dow Jones
The main advantage of trading using opposite ProShares and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| ProShares vs. ProShares Smart Materials | ProShares vs. ProShares SP Kensho | ProShares vs. ProShares Big Data | ProShares vs. ProShares SP Kensho |
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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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