Correlation Between SPDR SP and ProShares Smart

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

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

Diversification Opportunities for SPDR SP and ProShares Smart

0.86

Correlation Coefficient

SPDR SP  ProShares Smart

Very poor diversification

The 3 months correlation between SPDR and ProShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Metals and ProShares Smart Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Smart Materials and SPDR SP 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 SPDR SP Metals are associated (or correlated) with ProShares Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Smart Materials has no effect on the direction of SPDR SP i.e., SPDR SP and ProShares Smart go up and down completely randomly.

Pair Corralation between SPDR SP and ProShares Smart

Considering the 90-day investment horizon SPDR SP Metals is expected to generate 1.42 times more return on investment than ProShares Smart. However, SPDR SP is 1.42 times more volatile than ProShares Smart Materials. It trades about 0.35 of its potential returns per unit of risk. ProShares Smart Materials is currently generating about 0.13 per unit of risk. If you would invest  6,909  in SPDR SP Metals on July 7, 2025 and sell it today you would earn a total of  2,847  from holding SPDR SP Metals or generate 41.21% return on investment over 90 days.

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

SPDR SP Metals  vs.  ProShares Smart Materials

SPDR SP Metals

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Metals are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, SPDR SP exhibited solid returns over the last few months and may actually be approaching a breakup point.

ProShares Smart Materials

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Smart Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ProShares Smart may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Pair Trading with SPDR SP and ProShares Smart

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

The idea behind SPDR SP Metals and ProShares Smart Materials 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.