Correlation Between ProShares Trust and Invesco SP

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Can any of the company-specific risk be diversified away by investing in both ProShares Trust and Invesco 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 Trust and Invesco SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Trust and Invesco SP 500, you can compare the effects of market volatilities on ProShares Trust and Invesco 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 Trust with a short position of Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Trust and Invesco SP.

Diversification Opportunities for ProShares Trust and Invesco SP

-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between ProShares and Invesco is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 and ProShares Trust 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 Trust are associated (or correlated) with Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of ProShares Trust i.e., ProShares Trust and Invesco SP go up and down completely randomly.

Pair Corralation between ProShares Trust and Invesco SP

Given the investment horizon of 90 days ProShares Trust is expected to under-perform the Invesco SP. In addition to that, ProShares Trust is 6.04 times more volatile than Invesco SP 500. It trades about -0.06 of its total potential returns per unit of risk. Invesco SP 500 is currently generating about 0.15 per unit of volatility. If you would invest  16,493  in Invesco SP 500 on April 22, 2024 and sell it today you would earn a total of  347.00  from holding Invesco SP 500 or generate 2.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ProShares Trust   vs.  Invesco SP 500

 Performance 
       Timeline  
ProShares Trust 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ProShares Trust is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
Invesco SP 500 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Invesco SP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

ProShares Trust and Invesco SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares Trust and Invesco SP

The main advantage of trading using opposite ProShares Trust and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Trust position performs unexpectedly, Invesco 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 Invesco SP will offset losses from the drop in Invesco SP's long position.
The idea behind ProShares Trust and Invesco 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.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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