Correlation Between ProShares and SPDR SP

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

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

Diversification Opportunities for ProShares and SPDR SP

0.81

Correlation Coefficient

ProShares  SPDR SP

Very poor diversification

The 3 months correlation between ProShares and SPDR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ProShares DJ Brookfield and SPDR SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Kensho 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 DJ Brookfield are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Kensho has no effect on the direction of ProShares i.e., ProShares and SPDR SP go up and down completely randomly.

Pair Corralation between ProShares and SPDR SP

Given the investment horizon of 90 days ProShares DJ Brookfield is expected to generate 0.8 times more return on investment than SPDR SP. However, ProShares DJ Brookfield is 1.25 times less risky than SPDR SP. It trades about 0.01 of its potential returns per unit of risk. SPDR SP Kensho is currently generating about -0.03 per unit of risk. If you would invest  5,025  in ProShares DJ Brookfield on October 22, 2024 and sell it today you would earn a total of  25.00  from holding ProShares DJ Brookfield or generate 0.5% return on investment over 90 days.

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

ProShares DJ Brookfield  vs.  SPDR SP Kensho

ProShares DJ Brookfield

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares DJ Brookfield are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, ProShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR SP Kensho

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Kensho has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, SPDR SP is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ProShares and SPDR SP

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

The idea behind ProShares DJ Brookfield and SPDR SP Kensho 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.