Correlation Between ProShares Short and MicroSectors FANG

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

By analyzing existing cross correlation between ProShares Short Dow30 and MicroSectors FANG Index, you can compare the effects of market volatilities on ProShares Short and MicroSectors FANG 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 Short with a short position of MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and MicroSectors FANG.

Diversification Opportunities for ProShares Short and MicroSectors FANG

0.91

Correlation Coefficient

ProShares Short  MicroSectors FANG

Almost no diversification

The 3 months correlation between ProShares and MicroSectors is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short Dow30 and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index and ProShares Short 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 Short Dow30 are associated (or correlated) with MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of ProShares Short i.e., ProShares Short and MicroSectors FANG go up and down completely randomly.

Pair Corralation between ProShares Short and MicroSectors FANG

Considering the 90-day investment horizon ProShares Short Dow30 is expected to generate 0.25 times more return on investment than MicroSectors FANG. However, ProShares Short Dow30 is 3.94 times less risky than MicroSectors FANG. It trades about -0.18 of its potential returns per unit of risk. MicroSectors FANG Index is currently generating about -0.32 per unit of risk. If you would invest  2,746  in ProShares Short Dow30 on April 30, 2025 and sell it today you would lose (230.00) from holding ProShares Short Dow30 or give up 8.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

ProShares Short Dow30  vs.  MicroSectors FANG Index

ProShares Short Dow30

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Short Dow30 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

MicroSectors FANG Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days MicroSectors FANG Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's technical and fundamental indicators remain rather sound which may send shares a bit higher in August 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with ProShares Short and MicroSectors FANG

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

The idea behind ProShares Short Dow30 and MicroSectors FANG Index 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.