Correlation Between ProShares and ALPS Sector
Can any of the company-specific risk be diversified away by investing in both ProShares and ALPS Sector 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 ALPS Sector 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 ALPS Sector Dividend, you can compare the effects of market volatilities on ProShares and ALPS Sector 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 ALPS Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and ALPS Sector.
Diversification Opportunities for ProShares and ALPS Sector
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and ALPS is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP 500 and ALPS Sector Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS Sector Dividend 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 ALPS Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS Sector Dividend has no effect on the direction of ProShares i.e., ProShares and ALPS Sector go up and down completely randomly.
Pair Corralation between ProShares and ALPS Sector
Given the investment horizon of 90 days ProShares is expected to generate 1.7 times less return on investment than ALPS Sector. But when comparing it to its historical volatility, ProShares SP 500 is 1.16 times less risky than ALPS Sector. It trades about 0.07 of its potential returns per unit of risk. ALPS Sector Dividend is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,906 in ALPS Sector Dividend on August 24, 2024 and sell it today you would earn a total of 109.00 from holding ALPS Sector Dividend or generate 1.85% 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. ALPS Sector Dividend
Performance |
| Timeline |
| ProShares SP 500 |
| ALPS Sector Dividend |
ProShares and ALPS Sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares and ALPS Sector
The main advantage of trading using opposite ProShares and ALPS Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares position performs unexpectedly, ALPS Sector 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 ALPS Sector will offset losses from the drop in ALPS Sector's long position.| ProShares vs. iShares Core Dividend | ProShares vs. SPDR SP Dividend | ProShares vs. Invesco SP 500 | ProShares vs. Vanguard Dividend Appreciation |
| ALPS Sector vs. ALPS International Sector | ALPS Sector vs. WisdomTree SmallCap Dividend | ALPS Sector vs. WisdomTree MidCap Dividend | ALPS Sector vs. Invesco SP Ultra |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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