Correlation Between SPDR SP and ProShares Short

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

By analyzing existing cross correlation between SPDR SP Kensho and ProShares Short MidCap400, you can compare the effects of market volatilities on SPDR SP and ProShares Short 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 SPDR SP with a short position of ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and ProShares Short.

Diversification Opportunities for SPDR SP and ProShares Short

-0.6

Correlation Coefficient

SPDR SP  ProShares Short

Excellent diversification

The 3 months correlation between SPDR and ProShares is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Kensho and ProShares Short MidCap400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short MidCap400 and SPDR SP 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 SPDR SP Kensho are associated (or correlated) with ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short MidCap400 has no effect on the direction of SPDR SP i.e., SPDR SP and ProShares Short go up and down completely randomly.

Pair Corralation between SPDR SP and ProShares Short

Given the investment horizon of 90 days SPDR SP is expected to generate 1.85 times less return on investment than ProShares Short. In addition to that, SPDR SP is 1.52 times more volatile than ProShares Short MidCap400. It trades about 0.09 of its total potential returns per unit of risk. ProShares Short MidCap400 is currently generating about 0.26 per unit of volatility. If you would invest  1,787  in ProShares Short MidCap400 on October 8, 2024 and sell it today you would earn a total of  97.00  from holding ProShares Short MidCap400 or generate 5.43% return on investment over 90 days.

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

SPDR SP Kensho  vs.  ProShares Short MidCap400

SPDR SP Kensho

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Kensho are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward-looking signals, SPDR SP unveiled solid returns over the last few months and may actually be approaching a breakup point.

ProShares Short MidCap400

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Short MidCap400 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ProShares Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SPDR SP and ProShares Short

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

The idea behind SPDR SP Kensho and ProShares Short MidCap400 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.