Correlation Between ProShares UltraShort and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and WisdomTree Europe 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 UltraShort and WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort 20 and WisdomTree Europe Quality, you can compare the effects of market volatilities on ProShares UltraShort and WisdomTree Europe 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 UltraShort with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and WisdomTree Europe.
Diversification Opportunities for ProShares UltraShort and WisdomTree Europe
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and WisdomTree is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and WisdomTree Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Quality and ProShares UltraShort 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 UltraShort 20 are associated (or correlated) with WisdomTree Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Quality has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and WisdomTree Europe go up and down completely randomly.
Pair Corralation between ProShares UltraShort and WisdomTree Europe
Considering the 90-day investment horizon ProShares UltraShort 20 is expected to generate 2.41 times more return on investment than WisdomTree Europe. However, ProShares UltraShort is 2.41 times more volatile than WisdomTree Europe Quality. It trades about -0.04 of its potential returns per unit of risk. WisdomTree Europe Quality is currently generating about -0.39 per unit of risk. If you would invest 3,401 in ProShares UltraShort 20 on August 27, 2024 and sell it today you would lose (83.00) from holding ProShares UltraShort 20 or give up 2.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort 20 vs. WisdomTree Europe Quality
Performance |
| Timeline |
| ProShares UltraShort |
| WisdomTree Europe Quality |
ProShares UltraShort and WisdomTree Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and WisdomTree Europe
The main advantage of trading using opposite ProShares UltraShort and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, WisdomTree Europe 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 WisdomTree Europe will offset losses from the drop in WisdomTree Europe's long position.| ProShares UltraShort vs. ProShares UltraShort 7 10 | ProShares UltraShort vs. ProShares UltraShort SP500 | ProShares UltraShort vs. iShares 20 Year | ProShares UltraShort vs. Direxion Daily 20 |
| WisdomTree Europe vs. WisdomTree International Hedged | WisdomTree Europe vs. WisdomTree Emerging Markets | WisdomTree Europe vs. WisdomTree Dynamic Currency |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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