Correlation Between Global X and ProShares

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

By analyzing existing cross correlation between Global X SP and ProShares SP 500, you can compare the effects of market volatilities on Global X 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 Global X with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and ProShares.

Diversification Opportunities for Global X and ProShares

0.92

Correlation Coefficient

Global X  ProShares

Almost no diversification

The 3 months correlation between Global and ProShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Global X SP and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 and Global X 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 Global X SP 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 500 has no effect on the direction of Global X i.e., Global X and ProShares go up and down completely randomly.

Pair Corralation between Global X and ProShares

Given the investment horizon of 90 days Global X SP is expected to under-perform the ProShares. But the etf apears to be less risky and, when comparing its historical volatility, Global X SP is 1.25 times less risky than ProShares. The etf trades about -0.08 of its potential returns per unit of risk. The ProShares SP 500 is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  4,400  in ProShares SP 500 on December 29, 2024 and sell it today you would lose (139.00) from holding ProShares SP 500 or give up 3.16% of portfolio value over 90 days.

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

Global X SP  vs.  ProShares SP 500

Global X SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Global X is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic 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 Global X and ProShares

The main advantage of trading using opposite Global X and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X SP and ProShares SP 500 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.