Correlation Between ProShares Trust and SPDR SP

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

By analyzing existing cross correlation between ProShares Trust and SPDR SP Kensho, you can compare the effects of market volatilities on ProShares Trust and SPDR SP 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 Trust with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Trust and SPDR SP.

Diversification Opportunities for ProShares Trust and SPDR SP

-0.95

Correlation Coefficient

ProShares Trust  SPDR SP

Pay attention - limited upside

The 3 months correlation between ProShares and SPDR is -0.95. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and SPDR SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Kensho and ProShares Trust 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 Trust are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Kensho has no effect on the direction of ProShares Trust i.e., ProShares Trust and SPDR SP go up and down completely randomly.

Pair Corralation between ProShares Trust and SPDR SP

Given the investment horizon of 90 days ProShares Trust is expected to under-perform the SPDR SP. In addition to that, ProShares Trust is 2.8 times more volatile than SPDR SP Kensho. It trades about -0.24 of its total potential returns per unit of risk. SPDR SP Kensho is currently generating about 0.3 per unit of volatility. If you would invest  4,768  in SPDR SP Kensho on September 2, 2024 and sell it today you would earn a total of  1,244  from holding SPDR SP Kensho or generate 26.09% return on investment over 90 days.

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

ProShares Trust   vs.  SPDR SP Kensho

ProShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

SPDR SP Kensho

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Kensho are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward-looking signals, SPDR SP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Trust and SPDR SP

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

The idea behind ProShares Trust and SPDR SP Kensho 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 Stocks Directory module to find actively traded stocks across global markets.