Correlation Between ProShares and SPDR SP
Can any of the company-specific risk be diversified away by investing in both ProShares and SPDR SP 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 SPDR SP 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 SPDR SP 1500, you can compare the effects of market volatilities on ProShares and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and SPDR SP.
Diversification Opportunities for ProShares and SPDR SP
Poor diversification
The 3 months correlation between ProShares and SPDR is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP 500 and SPDR SP 1500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 1500 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 1500 has no effect on the direction of ProShares i.e., ProShares and SPDR SP go up and down completely randomly.
Pair Corralation between ProShares and SPDR SP
Given the investment horizon of 90 days ProShares is expected to generate 1.34 times less return on investment than SPDR SP. But when comparing it to its historical volatility, ProShares SP 500 is 1.52 times less risky than SPDR SP. It trades about 0.4 of its potential returns per unit of risk. SPDR SP 1500 is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 18,315 in SPDR SP 1500 on September 1, 2024 and sell it today you would earn a total of 1,254 from holding SPDR SP 1500 or generate 6.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
ProShares SP 500 vs. SPDR SP 1500
Performance |
Timeline |
ProShares SP 500 |
SPDR SP 1500 |
ProShares and SPDR SP Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ProShares and SPDR SP
The main advantage of trading using opposite ProShares and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.ProShares vs. iShares Core SP | ProShares vs. iShares Core MSCI | ProShares vs. iShares Broad USD | ProShares vs. iShares Core SP |
SPDR SP vs. iShares Core SP | SPDR SP vs. iShares Core MSCI | SPDR SP vs. iShares Broad USD | SPDR SP 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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