Correlation Between PowerShares Preferred and PowerShares EURO

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

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

Diversification Opportunities for PowerShares Preferred and PowerShares EURO

0.13

Correlation Coefficient

PowerShares Preferred  PowerShares EURO

Average diversification

The 3 months correlation between PowerShares and PowerShares is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding PowerShares Preferred Shares and PowerShares EURO STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PowerShares EURO STOXX and PowerShares Preferred 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 Preferred Shares are associated (or correlated) with PowerShares EURO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerShares EURO STOXX has no effect on the direction of PowerShares Preferred i.e., PowerShares Preferred and PowerShares EURO go up and down completely randomly.

Pair Corralation between PowerShares Preferred and PowerShares EURO

Assuming the 90 days trading horizon PowerShares Preferred is expected to generate 3.83 times less return on investment than PowerShares EURO. In addition to that, PowerShares Preferred is 1.15 times more volatile than PowerShares EURO STOXX. It trades about 0.07 of its total potential returns per unit of risk. PowerShares EURO STOXX is currently generating about 0.3 per unit of volatility. If you would invest  231,178  in PowerShares EURO STOXX on April 22, 2025 and sell it today you would earn a total of  26,597  from holding PowerShares EURO STOXX or generate 11.5% return on investment over 90 days.

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

PowerShares Preferred Shares  vs.  PowerShares EURO STOXX

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 5 (%) 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.

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 23 (%) 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.

Pair Trading with PowerShares Preferred and PowerShares EURO

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

The idea behind PowerShares Preferred Shares and PowerShares EURO STOXX 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.