Correlation Between ProShares and SPDR Morgan

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

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

Diversification Opportunities for ProShares and SPDR Morgan

0.16

Correlation Coefficient

ProShares  SPDR Morgan

Average diversification

The 3 months correlation between ProShares and SPDR is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP MidCap and SPDR Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Morgan Stanley and ProShares 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 SP MidCap are associated (or correlated) with SPDR Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Morgan Stanley has no effect on the direction of ProShares i.e., ProShares and SPDR Morgan go up and down completely randomly.

Pair Corralation between ProShares and SPDR Morgan

Given the investment horizon of 90 days ProShares SP MidCap is expected to under-perform the SPDR Morgan. But the etf apears to be less risky and, when comparing its historical volatility, ProShares SP MidCap is 1.15 times less risky than SPDR Morgan. The etf trades about -0.27 of its potential returns per unit of risk. The SPDR Morgan Stanley is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  17,944  in SPDR Morgan Stanley on March 11, 2024 and sell it today you would earn a total of  793.00  from holding SPDR Morgan Stanley or generate 4.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ProShares SP MidCap  vs.  SPDR Morgan Stanley

ProShares SP MidCap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares SP MidCap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, ProShares is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

SPDR Morgan Stanley

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Morgan Stanley are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SPDR Morgan is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ProShares and SPDR Morgan

The main advantage of trading using opposite ProShares and SPDR Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares position performs unexpectedly, SPDR Morgan 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 Morgan will offset losses from the drop in SPDR Morgan's long position.

The idea behind ProShares SP MidCap and SPDR Morgan Stanley 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.