Correlation Between ProShares and WisdomTree Europe
Can any of the company-specific risk be diversified away by investing in both ProShares and WisdomTree Europe 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 and WisdomTree Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares SP MidCap and WisdomTree Europe Hedged, you can compare the effects of market volatilities on ProShares and WisdomTree Europe 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 with a short position of WisdomTree Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and WisdomTree Europe.
Diversification Opportunities for ProShares and WisdomTree Europe
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ProShares and WisdomTree is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP MidCap and WisdomTree Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Europe Hedged and ProShares 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 SP MidCap are associated (or correlated) with WisdomTree Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Europe Hedged has no effect on the direction of ProShares i.e., ProShares and WisdomTree Europe go up and down completely randomly.
Pair Corralation between ProShares and WisdomTree Europe
Given the investment horizon of 90 days ProShares SP MidCap is expected to under-perform the WisdomTree Europe. In addition to that, ProShares is 1.35 times more volatile than WisdomTree Europe Hedged. It trades about -0.03 of its total potential returns per unit of risk. WisdomTree Europe Hedged is currently generating about 0.19 per unit of volatility. If you would invest 3,703 in WisdomTree Europe Hedged on March 14, 2024 and sell it today you would earn a total of 271.00 from holding WisdomTree Europe Hedged or generate 7.32% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
ProShares SP MidCap vs. WisdomTree Europe Hedged
Performance |
Timeline |
ProShares SP MidCap |
WisdomTree Europe Hedged |
ProShares and WisdomTree Europe Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ProShares and WisdomTree Europe
The main advantage of trading using opposite ProShares and WisdomTree Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares position performs unexpectedly, WisdomTree Europe 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 WisdomTree Europe will offset losses from the drop in WisdomTree Europe's long position.ProShares vs. Vanguard Large Cap Index | ProShares vs. Vanguard Small Cap Growth | ProShares vs. Vanguard Mid Cap Growth | ProShares vs. Vanguard Small Cap Value |
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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.
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