Correlation Between Dimensional International and ProShares

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

By analyzing existing cross correlation between Dimensional International High and ProShares SP 500, you can compare the effects of market volatilities on Dimensional International 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 Dimensional International with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and ProShares.

Diversification Opportunities for Dimensional International and ProShares

-0.48

Correlation Coefficient

Dimensional International  ProShares

Very good diversification

The 3 months correlation between Dimensional and ProShares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International High and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 and Dimensional International 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 Dimensional International High 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 500 has no effect on the direction of Dimensional International i.e., Dimensional International and ProShares go up and down completely randomly.

Pair Corralation between Dimensional International and ProShares

Given the investment horizon of 90 days Dimensional International is expected to generate 3.6 times less return on investment than ProShares. In addition to that, Dimensional International is 1.14 times more volatile than ProShares SP 500. It trades about 0.03 of its total potential returns per unit of risk. ProShares SP 500 is currently generating about 0.14 per unit of volatility. If you would invest  3,607  in ProShares SP 500 on September 12, 2024 and sell it today you would earn a total of  960.00  from holding ProShares SP 500 or generate 26.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	69.89%
Values	Daily Returns

Dimensional International High  vs.  ProShares SP 500

Dimensional International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional International High has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Dimensional International is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

ProShares SP 500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, ProShares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dimensional International and ProShares

The main advantage of trading using opposite Dimensional International and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional International 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 Dimensional International High and ProShares SP 500 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.