Correlation Between Fidelity Covington and ProShares Smart

Can any of the company-specific risk be diversified away by investing in both Fidelity Covington and ProShares Smart 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 Fidelity Covington and ProShares Smart into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidelity Covington Trust and ProShares Smart Materials, you can compare the effects of market volatilities on Fidelity Covington and ProShares Smart 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 Fidelity Covington with a short position of ProShares Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Covington and ProShares Smart.

Diversification Opportunities for Fidelity Covington and ProShares Smart

0.85

Correlation Coefficient

Fidelity Covington  ProShares Smart

Very poor diversification

The 3 months correlation between Fidelity and ProShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust and ProShares Smart Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Smart Materials and Fidelity Covington 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 Fidelity Covington Trust are associated (or correlated) with ProShares Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Smart Materials has no effect on the direction of Fidelity Covington i.e., Fidelity Covington and ProShares Smart go up and down completely randomly.

Pair Corralation between Fidelity Covington and ProShares Smart

Given the investment horizon of 90 days Fidelity Covington Trust is expected to under-perform the ProShares Smart. In addition to that, Fidelity Covington is 1.72 times more volatile than ProShares Smart Materials. It trades about -0.09 of its total potential returns per unit of risk. ProShares Smart Materials is currently generating about -0.07 per unit of volatility. If you would invest  3,250  in ProShares Smart Materials on September 14, 2024 and sell it today you would lose (140.10) from holding ProShares Smart Materials or give up 4.31% of portfolio value over 90 days.

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

Fidelity Covington Trust  vs.  ProShares Smart Materials

Fidelity Covington Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Covington Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

ProShares Smart Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Smart Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ProShares Smart is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fidelity Covington and ProShares Smart

The main advantage of trading using opposite Fidelity Covington and ProShares Smart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Covington position performs unexpectedly, ProShares Smart 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 Smart will offset losses from the drop in ProShares Smart's long position.

The idea behind Fidelity Covington Trust and ProShares Smart Materials 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.