Correlation Between SPDR Series and ProShares Trust

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

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

Diversification Opportunities for SPDR Series and ProShares Trust

0.38

Correlation Coefficient

SPDR Series  ProShares Trust

Weak diversification

The 3 months correlation between SPDR and ProShares is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Series Trust and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust and SPDR Series 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 Series Trust 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 SPDR Series i.e., SPDR Series and ProShares Trust go up and down completely randomly.

Pair Corralation between SPDR Series and ProShares Trust

Assuming the 90 days trading horizon SPDR Series Trust is expected to under-perform the ProShares Trust. But the etf apears to be less risky and, when comparing its historical volatility, SPDR Series Trust is 1.22 times less risky than ProShares Trust. The etf trades about -0.19 of its potential returns per unit of risk. The ProShares Trust is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  194,480  in ProShares Trust on December 29, 2024 and sell it today you would lose (11,180) from holding ProShares Trust or give up 5.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

SPDR Series Trust  vs.  ProShares Trust

SPDR Series Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

ProShares Trust

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SPDR Series and ProShares Trust

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

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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.