Correlation Between IShares Semiconductor and ProShares

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

By analyzing existing cross correlation between iShares Semiconductor ETF and ProShares SP 500, you can compare the effects of market volatilities on IShares Semiconductor and ProShares 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 IShares Semiconductor with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Semiconductor and ProShares.

Diversification Opportunities for IShares Semiconductor and ProShares

0.84

Correlation Coefficient

IShares Semiconductor  ProShares

Very poor diversification

The 3 months correlation between IShares and ProShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding iShares Semiconductor ETF and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 and IShares Semiconductor 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 iShares Semiconductor ETF are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of IShares Semiconductor i.e., IShares Semiconductor and ProShares go up and down completely randomly.

Pair Corralation between IShares Semiconductor and ProShares

Given the investment horizon of 90 days iShares Semiconductor ETF is expected to generate 1.94 times more return on investment than ProShares. However, IShares Semiconductor is 1.94 times more volatile than ProShares SP 500. It trades about 0.23 of its potential returns per unit of risk. ProShares SP 500 is currently generating about 0.07 per unit of risk. If you would invest  18,816  in iShares Semiconductor ETF on May 5, 2025 and sell it today you would earn a total of  4,908  from holding iShares Semiconductor ETF or generate 26.08% return on investment over 90 days.

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

iShares Semiconductor ETF  vs.  ProShares SP 500

iShares Semiconductor ETF

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Semiconductor ETF are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, IShares Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.

ProShares SP 500

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP 500 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, ProShares is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with IShares Semiconductor and ProShares

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

The idea behind iShares Semiconductor ETF and ProShares 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.