Correlation Between SPDR SP and ProShares Big

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

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

Diversification Opportunities for SPDR SP and ProShares Big

0.52

Correlation Coefficient

SPDR SP  ProShares Big

Very weak diversification

The 3 months correlation between SPDR and ProShares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Oil 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 SPDR SP 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 SPDR SP Oil 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 SPDR SP i.e., SPDR SP and ProShares Big go up and down completely randomly.

Pair Corralation between SPDR SP and ProShares Big

Considering the 90-day investment horizon SPDR SP Oil is expected to generate 0.75 times more return on investment than ProShares Big. However, SPDR SP Oil is 1.33 times less risky than ProShares Big. It trades about 0.05 of its potential returns per unit of risk. ProShares Big Data is currently generating about -0.04 per unit of risk. If you would invest  12,780  in SPDR SP Oil on December 27, 2024 and sell it today you would earn a total of  535.00  from holding SPDR SP Oil or generate 4.19% return on investment over 90 days.

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

SPDR SP Oil  vs.  ProShares Big Data

SPDR SP Oil

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Oil are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, SPDR SP is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

ProShares Big Data

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SPDR SP and ProShares Big

The main advantage of trading using opposite SPDR SP and ProShares Big positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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 SPDR SP Oil 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.