Correlation Between Main Buywrite and ProShares

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

By analyzing existing cross correlation between Main Buywrite ETF and ProShares SP 500, you can compare the effects of market volatilities on Main Buywrite and ProShares 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 Main Buywrite with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Buywrite and ProShares.

Diversification Opportunities for Main Buywrite and ProShares

0.95

Correlation Coefficient

Main Buywrite  ProShares

Almost no diversification

The 3 months correlation between Main and ProShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Main Buywrite ETF and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 and Main Buywrite 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 Main Buywrite ETF are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of Main Buywrite i.e., Main Buywrite and ProShares go up and down completely randomly.

Pair Corralation between Main Buywrite and ProShares

Given the investment horizon of 90 days Main Buywrite is expected to generate 3.77 times less return on investment than ProShares. But when comparing it to its historical volatility, Main Buywrite ETF is 2.99 times less risky than ProShares. It trades about 0.16 of its potential returns per unit of risk. ProShares SP 500 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,208  in ProShares SP 500 on September 4, 2024 and sell it today you would earn a total of  366.00  from holding ProShares SP 500 or generate 8.7% return on investment over 90 days.

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

Main Buywrite ETF  vs.  ProShares SP 500

Main Buywrite ETF

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Main Buywrite ETF are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Main Buywrite is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ProShares SP 500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, ProShares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Main Buywrite and ProShares

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

The idea behind Main Buywrite ETF and ProShares SP 500 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.