Correlation Between Financial Select and ProShares Big

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

By analyzing existing cross correlation between Financial Select Sector and ProShares Big Data, you can compare the effects of market volatilities on Financial Select and ProShares Big 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 Financial Select with a short position of ProShares Big. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and ProShares Big.

Diversification Opportunities for Financial Select and ProShares Big

0.88

Correlation Coefficient

Financial Select  ProShares Big

Very poor diversification

The 3 months correlation between Financial and ProShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector and ProShares Big Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Big Data and Financial Select 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 Financial Select Sector are associated (or correlated) with ProShares Big. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Big Data has no effect on the direction of Financial Select i.e., Financial Select and ProShares Big go up and down completely randomly.

Pair Corralation between Financial Select and ProShares Big

Considering the 90-day investment horizon Financial Select Sector is expected to under-perform the ProShares Big. But the etf apears to be less risky and, when comparing its historical volatility, Financial Select Sector is 1.89 times less risky than ProShares Big. The etf trades about -0.17 of its potential returns per unit of risk. The ProShares Big Data is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,431  in ProShares Big Data on September 22, 2024 and sell it today you would earn a total of  18.00  from holding ProShares Big Data or generate 0.41% return on investment over 90 days.

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

Financial Select Sector  vs.  ProShares Big Data

Financial Select Sector

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Select Sector are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Financial Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ProShares Big Data

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Big Data are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ProShares Big unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financial Select and ProShares Big

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

The idea behind Financial Select Sector and ProShares Big Data 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.