Correlation Between ProShares and Invesco RAFI
Can any of the company-specific risk be diversified away by investing in both ProShares and Invesco RAFI 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 and Invesco RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares SP 500 and Invesco RAFI Strategic, you can compare the effects of market volatilities on ProShares and Invesco RAFI 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 with a short position of Invesco RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and Invesco RAFI.
Diversification Opportunities for ProShares and Invesco RAFI
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and Invesco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP 500 and Invesco RAFI Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco RAFI Strategic and ProShares 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 SP 500 are associated (or correlated) with Invesco RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco RAFI Strategic has no effect on the direction of ProShares i.e., ProShares and Invesco RAFI go up and down completely randomly.
Pair Corralation between ProShares and Invesco RAFI
Given the investment horizon of 90 days ProShares is expected to generate 1.77 times less return on investment than Invesco RAFI. In addition to that, ProShares is 1.0 times more volatile than Invesco RAFI Strategic. It trades about 0.06 of its total potential returns per unit of risk. Invesco RAFI Strategic is currently generating about 0.11 per unit of volatility. If you would invest 3,603 in Invesco RAFI Strategic on August 31, 2024 and sell it today you would earn a total of 1,600 from holding Invesco RAFI Strategic or generate 44.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares SP 500 vs. Invesco RAFI Strategic
Performance |
| Timeline |
| ProShares SP 500 |
| Invesco RAFI Strategic |
ProShares and Invesco RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares and Invesco RAFI
The main advantage of trading using opposite ProShares and Invesco RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares position performs unexpectedly, Invesco RAFI 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 Invesco RAFI will offset losses from the drop in Invesco RAFI's long position.| ProShares vs. iShares Core Dividend | ProShares vs. SPDR SP Dividend | ProShares vs. Invesco SP 500 | ProShares vs. Vanguard Dividend Appreciation |
| Invesco RAFI vs. iShares Core SP | Invesco RAFI vs. iShares Core MSCI | Invesco RAFI vs. iShares Broad USD | Invesco RAFI vs. iShares Core SP |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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