Correlation Between ProShares VIX and ProShares VIX

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Can any of the company-specific risk be diversified away by investing in both ProShares VIX 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 ProShares VIX and ProShares VIX 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 VIX Short Term, you can compare the effects of market volatilities on ProShares VIX 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 ProShares VIX with a short position of ProShares VIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares VIX and ProShares VIX.

Diversification Opportunities for ProShares VIX and ProShares VIX

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between ProShares and ProShares is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding ProShares VIX Mid Term 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 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 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 ProShares VIX i.e., ProShares VIX and ProShares VIX go up and down completely randomly.

Pair Corralation between ProShares VIX and ProShares VIX

Given the investment horizon of 90 days ProShares VIX is expected to generate 6.23 times less return on investment than ProShares VIX. But when comparing it to its historical volatility, ProShares VIX Mid Term is 2.51 times less risky than ProShares VIX. It trades about 0.03 of its potential returns per unit of risk. ProShares VIX Short Term is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,408  in ProShares VIX Short Term on January 15, 2024 and sell it today you would earn a total of  62.00  from holding ProShares VIX Short Term or generate 4.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

ProShares VIX Mid Term  vs.  ProShares VIX Short Term

 Performance 
       Timeline  
ProShares VIX Mid 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares VIX Mid Term are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ProShares VIX is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
ProShares VIX Short 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ProShares VIX Short Term has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ProShares VIX is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ProShares VIX and ProShares VIX Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares VIX and ProShares VIX

The main advantage of trading using opposite ProShares VIX and ProShares VIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares VIX 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 ProShares VIX Mid Term 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.
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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