Correlation Between ProShares Inflation and SPDR SSgA

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

Diversification Opportunities for ProShares Inflation and SPDR SSgA

0.21

Correlation Coefficient

ProShares Inflation  SPDR SSgA

Modest diversification

The 3 months correlation between ProShares and SPDR is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Inflation Expectatio 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 Inflation 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 Inflation Expectations 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 Inflation i.e., ProShares Inflation and SPDR SSgA go up and down completely randomly.

Pair Corralation between ProShares Inflation and SPDR SSgA

Given the investment horizon of 90 days ProShares Inflation Expectations is expected to generate 0.84 times more return on investment than SPDR SSgA. However, ProShares Inflation Expectations is 1.18 times less risky than SPDR SSgA. It trades about -0.14 of its potential returns per unit of risk. SPDR SSgA Multi Asset is currently generating about -0.3 per unit of risk. If you would invest  3,345  in ProShares Inflation Expectations on September 18, 2024 and sell it today you would lose (43.50) from holding ProShares Inflation Expectations or give up 1.3% of portfolio value over 90 days.

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

ProShares Inflation Expectatio  vs.  SPDR SSgA Multi Asset

ProShares Inflation

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Inflation Expectations are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ProShares Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SPDR SSgA Multi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SSgA Multi Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, SPDR SSgA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares Inflation and SPDR SSgA

The main advantage of trading using opposite ProShares Inflation and SPDR SSgA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Inflation 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 Inflation Expectations 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.