Correlation Between ProShares Nasdaq and WGRO

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

By analyzing existing cross correlation between ProShares Nasdaq 100 Dorsey and WGRO, you can compare the effects of market volatilities on ProShares Nasdaq and WGRO 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 Nasdaq with a short position of WGRO. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Nasdaq and WGRO.

Diversification Opportunities for ProShares Nasdaq and WGRO

0.83

Correlation Coefficient

ProShares Nasdaq  WGRO

Very poor diversification

The 3 months correlation between ProShares and WGRO is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Nasdaq 100 Dorsey and WGRO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WGRO and ProShares Nasdaq 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 Nasdaq 100 Dorsey are associated (or correlated) with WGRO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WGRO has no effect on the direction of ProShares Nasdaq i.e., ProShares Nasdaq and WGRO go up and down completely randomly.

Pair Corralation between ProShares Nasdaq and WGRO

Given the investment horizon of 90 days ProShares Nasdaq 100 Dorsey is expected to generate 1.45 times more return on investment than WGRO. However, ProShares Nasdaq is 1.45 times more volatile than WGRO. It trades about 0.06 of its potential returns per unit of risk. WGRO is currently generating about 0.09 per unit of risk. If you would invest  3,127  in ProShares Nasdaq 100 Dorsey on September 23, 2024 and sell it today you would earn a total of  1,490  from holding ProShares Nasdaq 100 Dorsey or generate 47.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	28.17%
Values	Daily Returns

ProShares Nasdaq 100 Dorsey  vs.  WGRO

ProShares Nasdaq 100

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Nasdaq 100 Dorsey are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, ProShares Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WGRO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WGRO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, WGRO is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ProShares Nasdaq and WGRO

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

The idea behind ProShares Nasdaq 100 Dorsey and WGRO 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.