Correlation Between IShares Technology and ProShares Big

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

By analyzing existing cross correlation between iShares Technology ETF and ProShares Big Data, you can compare the effects of market volatilities on IShares Technology and ProShares Big 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 IShares Technology with a short position of ProShares Big. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Technology and ProShares Big.

Diversification Opportunities for IShares Technology and ProShares Big

0.81

Correlation Coefficient

IShares Technology  ProShares Big

Very poor diversification

The 3 months correlation between IShares and ProShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Technology ETF and ProShares Big Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Big Data and IShares Technology 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 iShares Technology ETF are associated (or correlated) with ProShares Big. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Big Data has no effect on the direction of IShares Technology i.e., IShares Technology and ProShares Big go up and down completely randomly.

Pair Corralation between IShares Technology and ProShares Big

Considering the 90-day investment horizon IShares Technology is expected to generate 3.53 times less return on investment than ProShares Big. But when comparing it to its historical volatility, iShares Technology ETF is 1.12 times less risky than ProShares Big. It trades about 0.09 of its potential returns per unit of risk. ProShares Big Data is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,560  in ProShares Big Data on August 30, 2024 and sell it today you would earn a total of  1,011  from holding ProShares Big Data or generate 28.4% return on investment over 90 days.

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

iShares Technology ETF  vs.  ProShares Big Data

iShares Technology ETF

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Technology ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Technology may actually be approaching a critical reversion point that can send shares even higher in December 2024.

ProShares Big Data

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Big Data are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ProShares Big unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Technology and ProShares Big

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

The idea behind iShares Technology ETF and ProShares Big Data 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.