Correlation Between ProShares Online and SPDR SP

Can any of the company-specific risk be diversified away by investing in both ProShares Online 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 Online 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 Online Retail and SPDR SP Retail, you can compare the effects of market volatilities on ProShares Online 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 Online with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Online and SPDR SP.

Diversification Opportunities for ProShares Online and SPDR SP

0.78

Correlation Coefficient

ProShares Online  SPDR SP

Poor diversification

The 3 months correlation between ProShares and SPDR is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Online Retail and SPDR SP Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Retail and ProShares Online 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 Online Retail 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 Retail has no effect on the direction of ProShares Online i.e., ProShares Online and SPDR SP go up and down completely randomly.

Pair Corralation between ProShares Online and SPDR SP

Given the investment horizon of 90 days ProShares Online Retail is expected to generate 0.98 times more return on investment than SPDR SP. However, ProShares Online Retail is 1.02 times less risky than SPDR SP. It trades about -0.05 of its potential returns per unit of risk. SPDR SP Retail is currently generating about -0.21 per unit of risk. If you would invest  3,870  in ProShares Online Retail on January 26, 2024 and sell it today you would lose (55.00) from holding ProShares Online Retail or give up 1.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

ProShares Online Retail  vs.  SPDR SP Retail

ProShares Online Retail

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Online Retail are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, ProShares Online may actually be approaching a critical reversion point that can send shares even higher in May 2024.

SPDR SP Retail

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Retail are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR SP 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 ProShares Online and SPDR SP

The main advantage of trading using opposite ProShares Online and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Online 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 Online Retail and SPDR SP Retail 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.