Correlation Between ProShares Short and Defiance Daily
Can any of the company-specific risk be diversified away by investing in both ProShares Short and Defiance Daily 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 Defiance Daily 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 Defiance Daily Target, you can compare the effects of market volatilities on ProShares Short and Defiance Daily 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 Defiance Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and Defiance Daily.
Diversification Opportunities for ProShares Short and Defiance Daily
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and Defiance is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short Russell2000 and Defiance Daily Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Daily Target 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 Defiance Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Daily Target has no effect on the direction of ProShares Short i.e., ProShares Short and Defiance Daily go up and down completely randomly.
Pair Corralation between ProShares Short and Defiance Daily
Considering the 90-day investment horizon ProShares Short Russell2000 is expected to under-perform the Defiance Daily. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Short Russell2000 is 25.61 times less risky than Defiance Daily. The etf trades about -0.08 of its potential returns per unit of risk. The Defiance Daily Target is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,832 in Defiance Daily Target on September 1, 2024 and sell it today you would lose (1,221) from holding Defiance Daily Target or give up 66.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 26.77% |
| Values | Daily Returns |
ProShares Short Russell2000 vs. Defiance Daily Target
Performance |
| Timeline |
| ProShares Short Russ |
| Defiance Daily Target |
ProShares Short and Defiance Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Short and Defiance Daily
The main advantage of trading using opposite ProShares Short and Defiance Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Short position performs unexpectedly, Defiance Daily 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 Defiance Daily will offset losses from the drop in Defiance Daily's long position.The idea behind ProShares Short Russell2000 and Defiance Daily Target 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.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |