Correlation Between Proshares Russell and FlexShares Core

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

By analyzing existing cross correlation between Proshares Russell 2000 and FlexShares Core Select, you can compare the effects of market volatilities on Proshares Russell and FlexShares Core 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 Russell with a short position of FlexShares Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proshares Russell and FlexShares Core.

Diversification Opportunities for Proshares Russell and FlexShares Core

-0.6

Correlation Coefficient

Proshares Russell  FlexShares Core

Excellent diversification

The 3 months correlation between Proshares and FlexShares is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Proshares Russell 2000 and FlexShares Core Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FlexShares Core Select and Proshares Russell 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 Russell 2000 are associated (or correlated) with FlexShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FlexShares Core Select has no effect on the direction of Proshares Russell i.e., Proshares Russell and FlexShares Core go up and down completely randomly.

Pair Corralation between Proshares Russell and FlexShares Core

Given the investment horizon of 90 days Proshares Russell is expected to generate 1.85 times less return on investment than FlexShares Core. In addition to that, Proshares Russell is 17.21 times more volatile than FlexShares Core Select. It trades about 0.0 of its total potential returns per unit of risk. FlexShares Core Select is currently generating about 0.12 per unit of volatility. If you would invest  2,164  in FlexShares Core Select on December 30, 2024 and sell it today you would earn a total of  53.00  from holding FlexShares Core Select or generate 2.45% return on investment over 90 days.

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

Proshares Russell 2000  vs.  FlexShares Core Select

Proshares Russell 2000

Risk-Adjusted Performance

Very Weak

Over the last 90 days Proshares Russell 2000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Proshares Russell is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

FlexShares Core Select

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Core Select are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, FlexShares Core is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Proshares Russell and FlexShares Core

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

The idea behind Proshares Russell 2000 and FlexShares Core Select 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.