Correlation Between ProShares VIX and LHA Market

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

By analyzing existing cross correlation between ProShares VIX Mid Term and LHA Market State, you can compare the effects of market volatilities on ProShares VIX and LHA Market 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 VIX with a short position of LHA Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares VIX and LHA Market.

Diversification Opportunities for ProShares VIX and LHA Market

-0.01

Correlation Coefficient

ProShares VIX  LHA Market

Good diversification

The 3 months correlation between ProShares and LHA is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding ProShares VIX Mid Term and LHA Market State in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LHA Market State and ProShares VIX 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 VIX Mid Term are associated (or correlated) with LHA Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LHA Market State has no effect on the direction of ProShares VIX i.e., ProShares VIX and LHA Market go up and down completely randomly.

Pair Corralation between ProShares VIX and LHA Market

Given the investment horizon of 90 days ProShares VIX Mid Term is expected to under-perform the LHA Market. In addition to that, ProShares VIX is 4.78 times more volatile than LHA Market State. It trades about -0.06 of its total potential returns per unit of risk. LHA Market State is currently generating about -0.03 per unit of volatility. If you would invest  2,389  in LHA Market State on September 13, 2024 and sell it today you would lose (148.00) from holding LHA Market State or give up 6.2% of portfolio value over 90 days.

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

ProShares VIX Mid Term  vs.  LHA Market State

ProShares VIX Mid

Risk-Adjusted Performance

0 of 100

Very Weak

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

LHA Market State

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LHA Market State are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, LHA Market is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares VIX and LHA Market

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

The idea behind ProShares VIX Mid Term and LHA Market State 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.