Correlation Between ProShares Supply and Industrial Select
Can any of the company-specific risk be diversified away by investing in both ProShares Supply and Industrial Select 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 Supply and Industrial Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Supply Chain and Industrial Select Sector, you can compare the effects of market volatilities on ProShares Supply and Industrial Select 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 Supply with a short position of Industrial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Supply and Industrial Select.
Diversification Opportunities for ProShares Supply and Industrial Select
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and Industrial is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Supply Chain and Industrial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Select Sector and ProShares Supply 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 Supply Chain are associated (or correlated) with Industrial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Select Sector has no effect on the direction of ProShares Supply i.e., ProShares Supply and Industrial Select go up and down completely randomly.
Pair Corralation between ProShares Supply and Industrial Select
Given the investment horizon of 90 days ProShares Supply is expected to generate 2.15 times less return on investment than Industrial Select. But when comparing it to its historical volatility, ProShares Supply Chain is 1.59 times less risky than Industrial Select. It trades about 0.23 of its potential returns per unit of risk. Industrial Select Sector is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 13,383 in Industrial Select Sector on September 1, 2024 and sell it today you would earn a total of 1,016 from holding Industrial Select Sector or generate 7.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
ProShares Supply Chain vs. Industrial Select Sector
Performance |
| Timeline |
| ProShares Supply Chain |
| Industrial Select Sector |
ProShares Supply and Industrial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Supply and Industrial Select
The main advantage of trading using opposite ProShares Supply and Industrial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Supply position performs unexpectedly, Industrial Select 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 Industrial Select will offset losses from the drop in Industrial Select's long position.| ProShares Supply vs. Industrial Select Sector | ProShares Supply vs. Driven Brands Holdings | ProShares Supply vs. iShares Industrials ETF | ProShares Supply vs. iShares Transportation Average |
| Industrial Select vs. Materials Select Sector | Industrial Select vs. Consumer Discretionary Select | Industrial Select vs. Consumer Staples Select | Industrial Select vs. Health Care Select |
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 Managers module to screen money managers from public funds and ETFs managed around the world.
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