Correlation Between Fidelity Covington and ProShares

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

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

Diversification Opportunities for Fidelity Covington and ProShares

0.57

Correlation Coefficient

Fidelity Covington  ProShares

Very weak diversification

The 3 months correlation between Fidelity and ProShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust and ProShares SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP Kensho and Fidelity Covington 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 Fidelity Covington Trust 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 Kensho has no effect on the direction of Fidelity Covington i.e., Fidelity Covington and ProShares go up and down completely randomly.

Pair Corralation between Fidelity Covington and ProShares

Given the investment horizon of 90 days Fidelity Covington Trust is expected to under-perform the ProShares. But the etf apears to be less risky and, when comparing its historical volatility, Fidelity Covington Trust is 1.35 times less risky than ProShares. The etf trades about -0.05 of its potential returns per unit of risk. The ProShares SP Kensho is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,161  in ProShares SP Kensho on September 12, 2024 and sell it today you would earn a total of  55.00  from holding ProShares SP Kensho or generate 2.55% return on investment over 90 days.

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

Fidelity Covington Trust  vs.  ProShares SP Kensho

Fidelity Covington Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Covington Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fidelity Covington 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 Kensho

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP Kensho are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, ProShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Covington and ProShares

The main advantage of trading using opposite Fidelity Covington and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Covington 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 Fidelity Covington Trust and ProShares 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.