Correlation Between ProShares Hedge and SPDR SSgA

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

By analyzing existing cross correlation between ProShares Hedge Replication and SPDR SSgA Multi Asset, you can compare the effects of market volatilities on ProShares Hedge and SPDR SSgA 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 Hedge with a short position of SPDR SSgA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Hedge and SPDR SSgA.

Diversification Opportunities for ProShares Hedge and SPDR SSgA

0.55

Correlation Coefficient

ProShares Hedge  SPDR SSgA

Very weak diversification

The 3 months correlation between ProShares and SPDR is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Hedge Replication and SPDR SSgA Multi Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSgA Multi and ProShares Hedge 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 Hedge Replication are associated (or correlated) with SPDR SSgA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSgA Multi has no effect on the direction of ProShares Hedge i.e., ProShares Hedge and SPDR SSgA go up and down completely randomly.

Pair Corralation between ProShares Hedge and SPDR SSgA

Considering the 90-day investment horizon ProShares Hedge is expected to generate 95.09 times less return on investment than SPDR SSgA. But when comparing it to its historical volatility, ProShares Hedge Replication is 1.9 times less risky than SPDR SSgA. It trades about 0.0 of its potential returns per unit of risk. SPDR SSgA Multi Asset is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,685  in SPDR SSgA Multi Asset on December 28, 2024 and sell it today you would earn a total of  171.00  from holding SPDR SSgA Multi Asset or generate 6.37% return on investment over 90 days.

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

ProShares Hedge Replication  vs.  SPDR SSgA Multi Asset

ProShares Hedge Repl

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Hedge Replication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, ProShares Hedge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SPDR SSgA Multi

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSgA Multi Asset are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, SPDR SSgA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ProShares Hedge and SPDR SSgA

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

The idea behind ProShares Hedge Replication and SPDR SSgA Multi Asset 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.