Can any of the company-specific risk be diversified away by investing in both ProShares Hedge and Listed Funds 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 Hedge and Listed Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Hedge Replication and Listed Funds Trust, you can compare the effects of market volatilities on ProShares Hedge and Listed Funds 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 Hedge with a short position of Listed Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Hedge and Listed Funds.
Diversification Opportunities for ProShares Hedge and Listed Funds
The 3 months correlation between ProShares and Listed is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Hedge Replication and Listed Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Listed Funds Trust and ProShares Hedge 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 Hedge Replication are associated (or correlated) with Listed Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Listed Funds Trust has no effect on the direction of ProShares Hedge i.e., ProShares Hedge and Listed Funds go up and down completely randomly.
Pair Corralation between ProShares Hedge and Listed Funds
Considering the 90-day investment horizon ProShares Hedge is expected to generate 5.46 times less return on investment than Listed Funds. But when comparing it to its historical volatility, ProShares Hedge Replication is 2.47 times less risky than Listed Funds. It trades about 0.05 of its potential returns per unit of risk. Listed Funds Trust is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 846.00 in Listed Funds Trust on June 23, 2023 and sell it today you would earn a total of 91.00 from holding Listed Funds Trust or generate 10.76% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Hedge Replication are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, ProShares Hedge is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Compared to the overall equity markets, risk-adjusted returns on investments in Listed Funds Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Listed Funds is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
ProShares Hedge and Listed Funds Volatility Contrast
Predicted Return Density
Pair Trading with ProShares Hedge and Listed Funds
The main advantage of trading using opposite ProShares Hedge and Listed Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Hedge position performs unexpectedly, Listed Funds 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 Listed Funds will offset losses from the drop in Listed Funds' long position.
The idea behind ProShares Hedge Replication and Listed Funds Trust 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.
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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