Correlation Between VanEck Semiconductor and ProShares
Can any of the company-specific risk be diversified away by investing in both VanEck Semiconductor and ProShares 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 VanEck Semiconductor and ProShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Semiconductor ETF and ProShares SP Technology, you can compare the effects of market volatilities on VanEck Semiconductor and ProShares 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 VanEck Semiconductor with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Semiconductor and ProShares.
Diversification Opportunities for VanEck Semiconductor and ProShares
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between VanEck and ProShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Semiconductor ETF and ProShares SP Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP Technology and VanEck Semiconductor 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 VanEck Semiconductor ETF are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP Technology has no effect on the direction of VanEck Semiconductor i.e., VanEck Semiconductor and ProShares go up and down completely randomly.
Pair Corralation between VanEck Semiconductor and ProShares
Considering the 90-day investment horizon VanEck Semiconductor ETF is expected to under-perform the ProShares. In addition to that, VanEck Semiconductor is 1.68 times more volatile than ProShares SP Technology. It trades about -0.03 of its total potential returns per unit of risk. ProShares SP Technology is currently generating about 0.01 per unit of volatility. If you would invest 7,707 in ProShares SP Technology on August 30, 2024 and sell it today you would earn a total of 15.00 from holding ProShares SP Technology or generate 0.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Semiconductor ETF vs. ProShares SP Technology
Performance |
| Timeline |
| VanEck Semiconductor ETF |
| ProShares SP Technology |
VanEck Semiconductor and ProShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Semiconductor and ProShares
The main advantage of trading using opposite VanEck Semiconductor and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Semiconductor position performs unexpectedly, ProShares 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 will offset losses from the drop in ProShares' long position.The idea behind VanEck Semiconductor ETF and ProShares SP Technology 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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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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