Correlation Between Invesco DB and ProShares VIX
Can any of the company-specific risk be diversified away by investing in both Invesco DB and ProShares VIX 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 Invesco DB and ProShares VIX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco DB Dollar and ProShares VIX Short Term, you can compare the effects of market volatilities on Invesco DB and ProShares VIX 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 Invesco DB with a short position of ProShares VIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco DB and ProShares VIX.
Diversification Opportunities for Invesco DB and ProShares VIX
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Invesco and ProShares is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Invesco DB Dollar and ProShares VIX Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares VIX Short and Invesco DB 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 Invesco DB Dollar are associated (or correlated) with ProShares VIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares VIX Short has no effect on the direction of Invesco DB i.e., Invesco DB and ProShares VIX go up and down completely randomly.
Pair Corralation between Invesco DB and ProShares VIX
Considering the 90-day investment horizon Invesco DB Dollar is expected to generate 0.14 times more return on investment than ProShares VIX. However, Invesco DB Dollar is 7.06 times less risky than ProShares VIX. It trades about -0.26 of its potential returns per unit of risk. ProShares VIX Short Term is currently generating about -0.15 per unit of risk. If you would invest 1,830 in Invesco DB Dollar on August 27, 2024 and sell it today you would lose (57.00) from holding Invesco DB Dollar or give up 3.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco DB Dollar vs. ProShares VIX Short Term
Performance |
| Timeline |
| Invesco DB Dollar |
| ProShares VIX Short |
Invesco DB and ProShares VIX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco DB and ProShares VIX
The main advantage of trading using opposite Invesco DB and ProShares VIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco DB position performs unexpectedly, ProShares VIX 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 VIX will offset losses from the drop in ProShares VIX's long position.The idea behind Invesco DB Dollar and ProShares VIX Short Term 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.| ProShares VIX vs. ProShares VIX Mid Term | ProShares VIX vs. ProShares Short VIX | ProShares VIX vs. ProShares Ultra VIX | ProShares VIX vs. iPath Series B |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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