Correlation Between ProShares VIX and ProShares Short

Can any of the company-specific risk be diversified away by investing in both ProShares VIX and ProShares Short 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 VIX and ProShares Short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProShares VIX Mid Term and ProShares Short MidCap400, you can compare the effects of market volatilities on ProShares VIX and ProShares Short 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 VIX with a short position of ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares VIX and ProShares Short.

Diversification Opportunities for ProShares VIX and ProShares Short

0.23

Correlation Coefficient

ProShares VIX  ProShares Short

Modest diversification

The 3 months correlation between ProShares and ProShares is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding ProShares VIX Mid Term and ProShares Short MidCap400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short MidCap400 and ProShares VIX 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 VIX Mid Term are associated (or correlated) with ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short MidCap400 has no effect on the direction of ProShares VIX i.e., ProShares VIX and ProShares Short go up and down completely randomly.

Pair Corralation between ProShares VIX and ProShares Short

Given the investment horizon of 90 days ProShares VIX Mid Term is expected to under-perform the ProShares Short. In addition to that, ProShares VIX is 1.08 times more volatile than ProShares Short MidCap400. It trades about -0.18 of its total potential returns per unit of risk. ProShares Short MidCap400 is currently generating about 0.07 per unit of volatility. If you would invest  2,029  in ProShares Short MidCap400 on March 9, 2024 and sell it today you would earn a total of  25.00  from holding ProShares Short MidCap400 or generate 1.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

ProShares VIX Mid Term  vs.  ProShares Short MidCap400

ProShares VIX Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares VIX Mid Term has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the ETF investors.

ProShares Short MidCap400

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Short MidCap400 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, ProShares Short is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares VIX and ProShares Short

The main advantage of trading using opposite ProShares VIX and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares VIX position performs unexpectedly, ProShares Short 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 Short will offset losses from the drop in ProShares Short's long position.

The idea behind ProShares VIX Mid Term and ProShares Short MidCap400 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.