Correlation Between Avantis Emerging and ProShares

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

By analyzing existing cross correlation between Avantis Emerging Markets and ProShares SP MidCap, you can compare the effects of market volatilities on Avantis Emerging and ProShares 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 Avantis Emerging with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Emerging and ProShares.

Diversification Opportunities for Avantis Emerging and ProShares

-0.47

Correlation Coefficient

Avantis Emerging  ProShares

Very good diversification

The 3 months correlation between Avantis and ProShares is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Emerging Markets and ProShares SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP MidCap and Avantis Emerging 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 Avantis Emerging Markets are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP MidCap has no effect on the direction of Avantis Emerging i.e., Avantis Emerging and ProShares go up and down completely randomly.

Pair Corralation between Avantis Emerging and ProShares

Given the investment horizon of 90 days Avantis Emerging Markets is expected to generate 0.85 times more return on investment than ProShares. However, Avantis Emerging Markets is 1.17 times less risky than ProShares. It trades about 0.18 of its potential returns per unit of risk. ProShares SP MidCap is currently generating about 0.06 per unit of risk. If you would invest  4,838  in Avantis Emerging Markets on September 14, 2024 and sell it today you would earn a total of  108.00  from holding Avantis Emerging Markets or generate 2.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Avantis Emerging Markets  vs.  ProShares SP MidCap

Avantis Emerging Markets

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Emerging Markets are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Avantis Emerging is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ProShares SP MidCap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP MidCap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, ProShares is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Avantis Emerging and ProShares

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

The idea behind Avantis Emerging Markets and ProShares SP MidCap 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.