Correlation Between ProShares Trust and Invesco SP

Can any of the company-specific risk be diversified away by investing in both ProShares Trust 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 Trust 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 Trust and Invesco SP SmallCap, you can compare the effects of market volatilities on ProShares Trust 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 Trust with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Trust and Invesco SP.

Diversification Opportunities for ProShares Trust and Invesco SP

-0.74

Correlation Coefficient

ProShares Trust  Invesco SP

Pay attention - limited upside

The 3 months correlation between ProShares and Invesco is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap and ProShares Trust 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 Trust 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 SmallCap has no effect on the direction of ProShares Trust i.e., ProShares Trust and Invesco SP go up and down completely randomly.

Pair Corralation between ProShares Trust and Invesco SP

Given the investment horizon of 90 days ProShares Trust is expected to generate 2.54 times more return on investment than Invesco SP. However, ProShares Trust is 2.54 times more volatile than Invesco SP SmallCap. It trades about 0.06 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about -0.1 per unit of risk. If you would invest  2,371  in ProShares Trust on December 30, 2024 and sell it today you would earn a total of  220.00  from holding ProShares Trust or generate 9.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ProShares Trust   vs.  Invesco SP SmallCap

ProShares Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, ProShares Trust may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Invesco SP SmallCap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP SmallCap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with ProShares Trust and Invesco SP

The main advantage of trading using opposite ProShares Trust and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Trust 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.

The idea behind ProShares Trust and Invesco SP SmallCap pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.