Correlation Between ProShares and Fidelity Covington

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

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

Diversification Opportunities for ProShares and Fidelity Covington

-0.58

Correlation Coefficient

ProShares  Fidelity Covington

Excellent diversification

The 3 months correlation between ProShares and Fidelity is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP Kensho and Fidelity Covington Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Covington Trust and ProShares 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 SP Kensho are associated (or correlated) with Fidelity Covington. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Covington Trust has no effect on the direction of ProShares i.e., ProShares and Fidelity Covington go up and down completely randomly.

Pair Corralation between ProShares and Fidelity Covington

Given the investment horizon of 90 days ProShares SP Kensho is expected to generate 0.87 times more return on investment than Fidelity Covington. However, ProShares SP Kensho is 1.15 times less risky than Fidelity Covington. It trades about 0.12 of its potential returns per unit of risk. Fidelity Covington Trust is currently generating about -0.06 per unit of risk. If you would invest  3,784  in ProShares SP Kensho on October 20, 2024 and sell it today you would earn a total of  426.00  from holding ProShares SP Kensho or generate 11.26% return on investment over 90 days.

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

ProShares SP Kensho  vs.  Fidelity Covington Trust

ProShares SP Kensho

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP Kensho are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward-looking signals, ProShares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with ProShares and Fidelity Covington

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

The idea behind ProShares SP Kensho and Fidelity Covington Trust 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.