Correlation Between ProShares and WisdomTree Quality

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

By analyzing existing cross correlation between ProShares SP 500 and WisdomTree Quality Dividend, you can compare the effects of market volatilities on ProShares and WisdomTree Quality 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 Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and WisdomTree Quality.

Diversification Opportunities for ProShares and WisdomTree Quality

0.81

Correlation Coefficient

ProShares  WisdomTree Quality

Very poor diversification

The 3 months correlation between ProShares and WisdomTree is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP 500 and WisdomTree Quality Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Quality 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 500 are associated (or correlated) with WisdomTree Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Quality has no effect on the direction of ProShares i.e., ProShares and WisdomTree Quality go up and down completely randomly.

Pair Corralation between ProShares and WisdomTree Quality

Given the investment horizon of 90 days ProShares is expected to generate 2.1 times less return on investment than WisdomTree Quality. In addition to that, ProShares is 1.28 times more volatile than WisdomTree Quality Dividend. It trades about 0.08 of its total potential returns per unit of risk. WisdomTree Quality Dividend is currently generating about 0.21 per unit of volatility. If you would invest  7,821  in WisdomTree Quality Dividend on May 3, 2025 and sell it today you would earn a total of  694.00  from holding WisdomTree Quality Dividend or generate 8.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

ProShares SP 500  vs.  WisdomTree Quality Dividend

ProShares SP 500

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, ProShares is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

WisdomTree Quality

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Quality Dividend are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, WisdomTree Quality may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with ProShares and WisdomTree Quality

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

The idea behind ProShares SP 500 and WisdomTree Quality Dividend 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 Global Correlations module to find global opportunities by holding instruments from different markets.