Correlation Between ProShares Short and SPDR Portfolio

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

By analyzing existing cross correlation between ProShares Short SP500 and SPDR Portfolio SP, you can compare the effects of market volatilities on ProShares Short and SPDR Portfolio 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 Short with a short position of SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and SPDR Portfolio.

Diversification Opportunities for ProShares Short and SPDR Portfolio

-0.66

Correlation Coefficient

ProShares Short  SPDR Portfolio

Excellent diversification

The 3 months correlation between ProShares and SPDR is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short SP500 and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP and ProShares Short 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 Short SP500 are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of ProShares Short i.e., ProShares Short and SPDR Portfolio go up and down completely randomly.

Pair Corralation between ProShares Short and SPDR Portfolio

Allowing for the 90-day total investment horizon ProShares Short SP500 is expected to under-perform the SPDR Portfolio. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Short SP500 is 1.32 times less risky than SPDR Portfolio. The etf trades about -0.05 of its potential returns per unit of risk. The SPDR Portfolio SP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,340  in SPDR Portfolio SP on October 23, 2024 and sell it today you would earn a total of  649.00  from holding SPDR Portfolio SP or generate 7.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

ProShares Short SP500  vs.  SPDR Portfolio SP

ProShares Short SP500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Short SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, ProShares Short is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

SPDR Portfolio SP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SPDR Portfolio may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ProShares Short and SPDR Portfolio

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

The idea behind ProShares Short SP500 and SPDR Portfolio SP 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.