Correlation Between WisdomTree New and ProShares

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

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

Diversification Opportunities for WisdomTree New and ProShares

-0.65

Correlation Coefficient

WisdomTree New  ProShares

Excellent diversification

The 3 months correlation between WisdomTree and ProShares is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree New Economy and ProShares SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP Kensho and WisdomTree New 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 WisdomTree New Economy 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 Kensho has no effect on the direction of WisdomTree New i.e., WisdomTree New and ProShares go up and down completely randomly.

Pair Corralation between WisdomTree New and ProShares

Given the investment horizon of 90 days WisdomTree New is expected to generate 356.75 times less return on investment than ProShares. But when comparing it to its historical volatility, WisdomTree New Economy is 1.72 times less risky than ProShares. It trades about 0.0 of its potential returns per unit of risk. ProShares SP Kensho is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,544  in ProShares SP Kensho on September 2, 2024 and sell it today you would earn a total of  683.00  from holding ProShares SP Kensho or generate 19.27% return on investment over 90 days.

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

WisdomTree New Economy  vs.  ProShares SP Kensho

WisdomTree New Economy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree New Economy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, WisdomTree New is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares SP Kensho

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP Kensho are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward-looking signals, ProShares showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree New and ProShares

The main advantage of trading using opposite WisdomTree New and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree New 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 WisdomTree New Economy and ProShares SP Kensho 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.