Correlation Between ProShares Hedge and ProShares Inflation

Can any of the company-specific risk be diversified away by investing in both ProShares Hedge and ProShares Inflation 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 ProShares Inflation 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 ProShares Inflation Expectations, you can compare the effects of market volatilities on ProShares Hedge and ProShares Inflation 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 ProShares Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Hedge and ProShares Inflation.

Diversification Opportunities for ProShares Hedge and ProShares Inflation

0.83

Correlation Coefficient

ProShares Hedge  ProShares Inflation

Very poor diversification

The 3 months correlation between ProShares and ProShares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Hedge Replication and ProShares Inflation Expectatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Inflation 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 ProShares Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Inflation has no effect on the direction of ProShares Hedge i.e., ProShares Hedge and ProShares Inflation go up and down completely randomly.

Pair Corralation between ProShares Hedge and ProShares Inflation

Considering the 90-day investment horizon ProShares Hedge is expected to generate 1.14 times less return on investment than ProShares Inflation. But when comparing it to its historical volatility, ProShares Hedge Replication is 1.39 times less risky than ProShares Inflation. It trades about 0.13 of its potential returns per unit of risk. ProShares Inflation Expectations is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,171  in ProShares Inflation Expectations on September 2, 2024 and sell it today you would earn a total of  103.00  from holding ProShares Inflation Expectations or generate 3.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

ProShares Hedge Replication  vs.  ProShares Inflation Expectatio

ProShares Hedge Repl

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Hedge Replication are ranked lower than 9 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

ProShares Inflation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Inflation Expectations are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ProShares Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ProShares Hedge and ProShares Inflation

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

The idea behind ProShares Hedge Replication and ProShares Inflation Expectations 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.