Correlation Between ProShares UltraShort and SPDR SP
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and SPDR SP 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 ProShares UltraShort and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort Bloomberg and SPDR SP 500, you can compare the effects of market volatilities on ProShares UltraShort and SPDR SP 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 ProShares UltraShort with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and SPDR SP.
Diversification Opportunities for ProShares UltraShort and SPDR SP
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and SPDR is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Bloomberg and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and ProShares UltraShort 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 ProShares UltraShort Bloomberg are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and SPDR SP go up and down completely randomly.
Pair Corralation between ProShares UltraShort and SPDR SP
Considering the 90-day investment horizon ProShares UltraShort Bloomberg is expected to under-perform the SPDR SP. In addition to that, ProShares UltraShort is 4.08 times more volatile than SPDR SP 500. It trades about -0.01 of its total potential returns per unit of risk. SPDR SP 500 is currently generating about 0.21 per unit of volatility. If you would invest 41,747 in SPDR SP 500 on January 19, 2024 and sell it today you would earn a total of 8,205 from holding SPDR SP 500 or generate 19.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort Bloomberg vs. SPDR SP 500
Performance |
| Timeline |
| ProShares UltraShort |
| SPDR SP 500 |
ProShares UltraShort and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and SPDR SP
The main advantage of trading using opposite ProShares UltraShort and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.The idea behind ProShares UltraShort Bloomberg and SPDR 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.
| SPDR SP vs. Dimensional Targeted Value | SPDR SP vs. Dimensional World ex | SPDR SP vs. Dimensional Small Cap |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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