Correlation Between SPDR SP and ProShares
Can any of the company-specific risk be diversified away by investing in both SPDR 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 SPDR SP and ProShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and ProShares DJ Brookfield, you can compare the effects of market volatilities on SPDR 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 SPDR SP with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and ProShares.
Diversification Opportunities for SPDR SP and ProShares
Poor diversification
The 3 months correlation between SPDR and ProShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and ProShares DJ Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares DJ Brookfield and SPDR 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 SPDR 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 DJ Brookfield has no effect on the direction of SPDR SP i.e., SPDR SP and ProShares go up and down completely randomly.
Pair Corralation between SPDR SP and ProShares
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 1.04 times more return on investment than ProShares. However, SPDR SP is 1.04 times more volatile than ProShares DJ Brookfield. It trades about 0.11 of its potential returns per unit of risk. ProShares DJ Brookfield is currently generating about 0.06 per unit of risk. If you would invest 38,753 in SPDR SP 500 on September 2, 2024 and sell it today you would earn a total of 21,502 from holding SPDR SP 500 or generate 55.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 500 vs. ProShares DJ Brookfield
Performance |
| Timeline |
| SPDR SP 500 |
| ProShares DJ Brookfield |
SPDR SP and ProShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and ProShares
The main advantage of trading using opposite SPDR SP and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR 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.| SPDR SP vs. Vanguard Total Stock | SPDR SP vs. Vanguard FTSE Emerging | SPDR SP vs. FT Vest Equity | SPDR SP vs. Zillow Group Class |
| ProShares vs. FlexShares STOXX Global | ProShares vs. SPDR SP Global | ProShares vs. iShares Infrastructure ETF | ProShares vs. iShares Global Infrastructure |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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