Correlation Between ProShares UltraShort and SPDR FactSet
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and SPDR FactSet 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 UltraShort and SPDR FactSet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort 20 and SPDR FactSet Innovative, you can compare the effects of market volatilities on ProShares UltraShort and SPDR FactSet 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 UltraShort with a short position of SPDR FactSet. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and SPDR FactSet.
Diversification Opportunities for ProShares UltraShort and SPDR FactSet
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and SPDR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and SPDR FactSet Innovative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR FactSet Innovative and ProShares UltraShort 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 UltraShort 20 are associated (or correlated) with SPDR FactSet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR FactSet Innovative has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and SPDR FactSet go up and down completely randomly.
Pair Corralation between ProShares UltraShort and SPDR FactSet
Considering the 90-day investment horizon ProShares UltraShort is expected to generate 3.68 times less return on investment than SPDR FactSet. In addition to that, ProShares UltraShort is 1.11 times more volatile than SPDR FactSet Innovative. It trades about 0.09 of its total potential returns per unit of risk. SPDR FactSet Innovative is currently generating about 0.36 per unit of volatility. If you would invest 15,810 in SPDR FactSet Innovative on August 26, 2024 and sell it today you would earn a total of 2,259 from holding SPDR FactSet Innovative or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort 20 vs. SPDR FactSet Innovative
Performance |
| Timeline |
| ProShares UltraShort |
| SPDR FactSet Innovative |
ProShares UltraShort and SPDR FactSet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and SPDR FactSet
The main advantage of trading using opposite ProShares UltraShort and SPDR FactSet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, SPDR FactSet 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 FactSet will offset losses from the drop in SPDR FactSet's long position.| ProShares UltraShort vs. Direxion Daily 20 | ProShares UltraShort vs. Direxion Daily 7 10 | ProShares UltraShort vs. ProShares Short 20 |
| SPDR FactSet vs. SPDR SP Software | SPDR FactSet vs. SPDR Morgan Stanley | SPDR FactSet vs. SPDR SP Health |
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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