Correlation Between Technology Select and ProShares

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

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

Diversification Opportunities for Technology Select and ProShares

-0.12

Correlation Coefficient

Technology Select  ProShares

Good diversification

The 3 months correlation between Technology and ProShares is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and ProShares SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP Kensho and Technology 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 Technology Select Sector are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP Kensho has no effect on the direction of Technology Select i.e., Technology Select and ProShares go up and down completely randomly.

Pair Corralation between Technology Select and ProShares

Considering the 90-day investment horizon Technology Select Sector is expected to generate 0.52 times more return on investment than ProShares. However, Technology Select Sector is 1.91 times less risky than ProShares. It trades about 0.12 of its potential returns per unit of risk. ProShares SP Kensho is currently generating about 0.01 per unit of risk. If you would invest  22,005  in Technology Select Sector on September 13, 2024 and sell it today you would earn a total of  1,932  from holding Technology Select Sector or generate 8.78% return on investment over 90 days.

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

Technology Select Sector  vs.  ProShares SP Kensho

Technology Select Sector

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Select Sector are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Technology Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ProShares SP Kensho

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Technology Select and ProShares

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

The idea behind Technology Select Sector and ProShares 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.