Correlation Between ProShares UltraShort and SSgA SPDR

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

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

Diversification Opportunities for ProShares UltraShort and SSgA SPDR

-0.5

Correlation Coefficient

ProShares UltraShort  SSgA SPDR

Very good diversification

The 3 months correlation between ProShares and SSgA is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort MSCI and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs and ProShares UltraShort 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 UltraShort MSCI are associated (or correlated) with SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and SSgA SPDR go up and down completely randomly.

Pair Corralation between ProShares UltraShort and SSgA SPDR

Considering the 90-day investment horizon ProShares UltraShort MSCI is expected to generate 1.92 times more return on investment than SSgA SPDR. However, ProShares UltraShort is 1.92 times more volatile than SSgA SPDR ETFs. It trades about 0.19 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about -0.1 per unit of risk. If you would invest  1,327  in ProShares UltraShort MSCI on September 30, 2024 and sell it today you would earn a total of  258.00  from holding ProShares UltraShort MSCI or generate 19.44% return on investment over 90 days.

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

ProShares UltraShort MSCI  vs.  SSgA SPDR ETFs

ProShares UltraShort MSCI

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort MSCI are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, ProShares UltraShort unveiled solid returns over the last few months and may actually be approaching a breakup point.

SSgA SPDR ETFs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSgA SPDR ETFs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, SSgA SPDR is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ProShares UltraShort and SSgA SPDR

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

The idea behind ProShares UltraShort MSCI and SSgA SPDR ETFs 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.