Correlation Between SWP Growth and ProShares Trust

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

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

Diversification Opportunities for SWP Growth and ProShares Trust

0.6

Correlation Coefficient

SWP Growth  ProShares Trust

Poor diversification

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

Pair Corralation between SWP Growth and ProShares Trust

Considering the 90-day investment horizon SWP Growth is expected to generate 16.6 times less return on investment than ProShares Trust. But when comparing it to its historical volatility, SWP Growth Income is 9.64 times less risky than ProShares Trust. It trades about 0.04 of its potential returns per unit of risk. ProShares Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,584  in ProShares Trust on October 7, 2024 and sell it today you would earn a total of  1,894  from holding ProShares Trust or generate 52.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	36.79%
Values	Daily Returns

SWP Growth Income  vs.  ProShares Trust

SWP Growth Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SWP Growth Income are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, SWP Growth is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

ProShares Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, ProShares Trust unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SWP Growth and ProShares Trust

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

The idea behind SWP Growth Income and ProShares 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.