Correlation Between WisdomTree Managed and ProShares UltraShort

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

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

Diversification Opportunities for WisdomTree Managed and ProShares UltraShort

-0.76

Correlation Coefficient

WisdomTree Managed  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between WisdomTree and ProShares is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Managed Futures and ProShares UltraShort Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and WisdomTree Managed 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 Managed Futures are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of WisdomTree Managed i.e., WisdomTree Managed and ProShares UltraShort go up and down completely randomly.

Pair Corralation between WisdomTree Managed and ProShares UltraShort

Given the investment horizon of 90 days WisdomTree Managed Futures is expected to generate 0.24 times more return on investment than ProShares UltraShort. However, WisdomTree Managed Futures is 4.2 times less risky than ProShares UltraShort. It trades about -0.26 of its potential returns per unit of risk. ProShares UltraShort Utilities is currently generating about -0.09 per unit of risk. If you would invest  3,750  in WisdomTree Managed Futures on February 1, 2024 and sell it today you would lose (93.00) from holding WisdomTree Managed Futures or give up 2.48% of portfolio value over 90 days.

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

WisdomTree Managed Futures  vs.  ProShares UltraShort Utilities

WisdomTree Managed

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Managed Futures are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, WisdomTree Managed is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Etf's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with WisdomTree Managed and ProShares UltraShort

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

The idea behind WisdomTree Managed Futures and ProShares UltraShort Utilities 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.