Correlation Between ProShares Trust and Invesco SP

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 SmallCap, 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

-0.64

Correlation Coefficient

ProShares Trust  Invesco SP

Excellent diversification

The 3 months correlation between ProShares and Invesco is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap 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 SmallCap 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 3.59 times more volatile than Invesco SP SmallCap. It trades about -0.19 of its total potential returns per unit of risk. Invesco SP SmallCap is currently generating about 0.08 per unit of volatility. If you would invest  3,693  in Invesco SP SmallCap on August 23, 2024 and sell it today you would earn a total of  164.00  from holding Invesco SP SmallCap or generate 4.44% return on investment over 90 days.

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

ProShares Trust   vs.  Invesco SP SmallCap

ProShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Invesco SP SmallCap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP SmallCap are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Invesco SP is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 SmallCap 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.