Correlation Between ProShares Short and MicroSectorsTM Oil
Can any of the company-specific risk be diversified away by investing in both ProShares Short and MicroSectorsTM Oil 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 MicroSectorsTM Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Short Dow30 and MicroSectorsTM Oil Gas, you can compare the effects of market volatilities on ProShares Short and MicroSectorsTM Oil 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 MicroSectorsTM Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and MicroSectorsTM Oil.
Diversification Opportunities for ProShares Short and MicroSectorsTM Oil
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ProShares and MicroSectorsTM is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short Dow30 and MicroSectorsTM Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectorsTM Oil Gas 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 Dow30 are associated (or correlated) with MicroSectorsTM Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectorsTM Oil Gas has no effect on the direction of ProShares Short i.e., ProShares Short and MicroSectorsTM Oil go up and down completely randomly.
Pair Corralation between ProShares Short and MicroSectorsTM Oil
Considering the 90-day investment horizon ProShares Short Dow30 is expected to under-perform the MicroSectorsTM Oil. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Short Dow30 is 4.38 times less risky than MicroSectorsTM Oil. The etf trades about -0.11 of its potential returns per unit of risk. The MicroSectorsTM Oil Gas is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,340 in MicroSectorsTM Oil Gas on February 26, 2024 and sell it today you would earn a total of 202.00 from holding MicroSectorsTM Oil Gas or generate 15.07% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
ProShares Short Dow30 vs. MicroSectorsTM Oil Gas
Performance |
Timeline |
ProShares Short Dow30 |
MicroSectorsTM Oil Gas |
ProShares Short and MicroSectorsTM Oil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ProShares Short and MicroSectorsTM Oil
The main advantage of trading using opposite ProShares Short and MicroSectorsTM Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Short position performs unexpectedly, MicroSectorsTM Oil 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 MicroSectorsTM Oil will offset losses from the drop in MicroSectorsTM Oil's long position.ProShares Short vs. Simplify Exchange Traded | ProShares Short vs. Simplify Interest Rate | ProShares Short vs. Simplify Exchange Traded | ProShares Short vs. Simplify Equity PLUS |
MicroSectorsTM Oil vs. Simplify Exchange Traded | MicroSectorsTM Oil vs. Simplify Interest Rate | MicroSectorsTM Oil vs. Simplify Exchange Traded | MicroSectorsTM Oil vs. Simplify Equity PLUS |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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