Correlation Between PowerShares EURO and PowerShares Preferred

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

By analyzing existing cross correlation between PowerShares EURO STOXX and PowerShares Preferred Shares, you can compare the effects of market volatilities on PowerShares EURO and PowerShares Preferred 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 PowerShares EURO with a short position of PowerShares Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of PowerShares EURO and PowerShares Preferred.

Diversification Opportunities for PowerShares EURO and PowerShares Preferred

0.14

Correlation Coefficient

PowerShares EURO  PowerShares Preferred

Average diversification

The 3 months correlation between PowerShares and PowerShares is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding PowerShares EURO STOXX and PowerShares Preferred Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PowerShares Preferred and PowerShares EURO 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 PowerShares EURO STOXX are associated (or correlated) with PowerShares Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerShares Preferred has no effect on the direction of PowerShares EURO i.e., PowerShares EURO and PowerShares Preferred go up and down completely randomly.

Pair Corralation between PowerShares EURO and PowerShares Preferred

Assuming the 90 days trading horizon PowerShares EURO STOXX is expected to generate 0.9 times more return on investment than PowerShares Preferred. However, PowerShares EURO STOXX is 1.11 times less risky than PowerShares Preferred. It trades about 0.29 of its potential returns per unit of risk. PowerShares Preferred Shares is currently generating about 0.03 per unit of risk. If you would invest  233,091  in PowerShares EURO STOXX on April 23, 2025 and sell it today you would earn a total of  25,784  from holding PowerShares EURO STOXX or generate 11.06% return on investment over 90 days.

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

PowerShares EURO STOXX  vs.  PowerShares Preferred Shares

PowerShares EURO STOXX

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PowerShares EURO STOXX are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PowerShares EURO may actually be approaching a critical reversion point that can send shares even higher in August 2025.

PowerShares Preferred

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PowerShares Preferred Shares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PowerShares Preferred is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PowerShares EURO and PowerShares Preferred

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

The idea behind PowerShares EURO STOXX and PowerShares Preferred Shares 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.