Correlation Between ProShares and Invesco SP
Can any of the company-specific risk be diversified away by investing in both ProShares and Invesco 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 Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares SP MidCap and Invesco SP 500, you can compare the effects of market volatilities on ProShares and Invesco 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and Invesco SP.
Diversification Opportunities for ProShares and Invesco SP
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 MidCap and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 MidCap are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of ProShares i.e., ProShares and Invesco SP go up and down completely randomly.
Pair Corralation between ProShares and Invesco SP
Given the investment horizon of 90 days ProShares is expected to generate 1.61 times less return on investment than Invesco SP. But when comparing it to its historical volatility, ProShares SP MidCap is 1.43 times less risky than Invesco SP. It trades about 0.05 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,472 in Invesco SP 500 on August 29, 2024 and sell it today you would earn a total of 2,880 from holding Invesco SP 500 or generate 44.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares SP MidCap vs. Invesco SP 500
Performance |
| Timeline |
| ProShares SP MidCap |
| Invesco SP 500 |
ProShares and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares and Invesco SP
The main advantage of trading using opposite ProShares and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares position performs unexpectedly, Invesco 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 Invesco SP will offset losses from the drop in Invesco SP's long position.| ProShares vs. ProShares Russell 2000 | ProShares vs. ProShares MSCI EAFE | ProShares vs. ProShares MSCI Emerging | ProShares vs. ProShares MSCI Europe |
| Invesco SP vs. Invesco SP 500 | Invesco SP vs. Invesco SP 500 | Invesco SP vs. Invesco SP 500 | Invesco SP vs. iShares MSCI USA |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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