Correlation Between Invesco QQQ and ProShares Trust

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

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

Diversification Opportunities for Invesco QQQ and ProShares Trust

0.95

Correlation Coefficient

Invesco QQQ  ProShares Trust

Almost no diversification

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

Pair Corralation between Invesco QQQ and ProShares Trust

Assuming the 90 days trading horizon Invesco QQQ is expected to generate 1.13 times less return on investment than ProShares Trust. But when comparing it to its historical volatility, Invesco QQQ Trust is 1.29 times less risky than ProShares Trust. It trades about 0.24 of its potential returns per unit of risk. ProShares Trust is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  175,900  in ProShares Trust on September 15, 2024 and sell it today you would earn a total of  35,780  from holding ProShares Trust or generate 20.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Invesco QQQ Trust  vs.  ProShares Trust

Invesco QQQ Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco QQQ Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Invesco QQQ showed solid returns over the last few months and may actually be approaching a breakup point.

ProShares Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, ProShares Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco QQQ and ProShares Trust

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

The idea behind Invesco QQQ Trust and ProShares Trust 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.