Correlation Between ProShares Short and ETRACS 2xMonthly
Can any of the company-specific risk be diversified away by investing in both ProShares Short and ETRACS 2xMonthly 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 Short and ETRACS 2xMonthly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Short Russell2000 and ETRACS 2xMonthly Pay, you can compare the effects of market volatilities on ProShares Short and ETRACS 2xMonthly 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 Short with a short position of ETRACS 2xMonthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and ETRACS 2xMonthly.
Diversification Opportunities for ProShares Short and ETRACS 2xMonthly
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between ProShares and ETRACS is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short Russell2000 and ETRACS 2xMonthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS 2xMonthly Pay and ProShares Short 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 Short Russell2000 are associated (or correlated) with ETRACS 2xMonthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS 2xMonthly Pay has no effect on the direction of ProShares Short i.e., ProShares Short and ETRACS 2xMonthly go up and down completely randomly.
Pair Corralation between ProShares Short and ETRACS 2xMonthly
Considering the 90-day investment horizon ProShares Short Russell2000 is expected to under-perform the ETRACS 2xMonthly. In addition to that, ProShares Short is 1.03 times more volatile than ETRACS 2xMonthly Pay. It trades about -0.08 of its total potential returns per unit of risk. ETRACS 2xMonthly Pay is currently generating about 0.07 per unit of volatility. If you would invest 889.00 in ETRACS 2xMonthly Pay on September 1, 2024 and sell it today you would earn a total of 109.00 from holding ETRACS 2xMonthly Pay or generate 12.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Short Russell2000 vs. ETRACS 2xMonthly Pay
Performance |
| Timeline |
| ProShares Short Russ |
| ETRACS 2xMonthly Pay |
ProShares Short and ETRACS 2xMonthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Short and ETRACS 2xMonthly
The main advantage of trading using opposite ProShares Short and ETRACS 2xMonthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Short position performs unexpectedly, ETRACS 2xMonthly 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 ETRACS 2xMonthly will offset losses from the drop in ETRACS 2xMonthly's long position.The idea behind ProShares Short Russell2000 and ETRACS 2xMonthly Pay 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.| ETRACS 2xMonthly vs. ETRACS 2xMonthly Pay | ETRACS 2xMonthly vs. ETRACS Monthly Pay | ETRACS 2xMonthly vs. ETRACS Monthly Pay | ETRACS 2xMonthly vs. ETRACS Monthly Pay |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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