Correlation Between IShares SP and ProShares
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 IShares SP and ProShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP 500 and ProShares SP 500, you can compare the effects of market volatilities on IShares SP 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 IShares SP with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and ProShares.
Diversification Opportunities for IShares SP and ProShares
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and ProShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 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 IShares SP 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 iShares SP 500 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 IShares SP i.e., IShares SP and ProShares go up and down completely randomly.
Pair Corralation between IShares SP and ProShares
Considering the 90-day investment horizon iShares SP 500 is expected to generate 1.02 times more return on investment than ProShares. However, IShares SP is 1.02 times more volatile than ProShares SP 500. It trades about 0.09 of its potential returns per unit of risk. ProShares SP 500 is currently generating about 0.05 per unit of risk. If you would invest 14,584 in iShares SP 500 on August 23, 2024 and sell it today you would earn a total of 5,639 from holding iShares SP 500 or generate 38.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP 500 vs. ProShares SP 500
Performance |
| Timeline |
| iShares SP 500 |
| ProShares SP 500 |
IShares SP and ProShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and ProShares
The main advantage of trading using opposite IShares SP and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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.| IShares SP vs. iShares SP 500 | IShares SP vs. iShares SP Mid Cap | IShares SP vs. iShares SP Small Cap | IShares SP vs. iShares SP Mid Cap |
| ProShares vs. Vanguard Russell 1000 | ProShares vs. Vanguard Russell 2000 | ProShares vs. Vanguard Russell 3000 | ProShares vs. Vanguard Russell 2000 |
Check out your portfolio center.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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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