Correlation Between Proshares Russell and Fidelity Total

Can any of the company-specific risk be diversified away by investing in both Proshares Russell and Fidelity Total 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 Fidelity Total 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 Fidelity Total Bond, you can compare the effects of market volatilities on Proshares Russell and Fidelity Total 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 Fidelity Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proshares Russell and Fidelity Total.

Diversification Opportunities for Proshares Russell and Fidelity Total

-0.46

Correlation Coefficient

Proshares Russell  Fidelity Total

Very good diversification

The 3 months correlation between Proshares and Fidelity is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Proshares Russell 2000 and Fidelity Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Total Bond 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 Fidelity Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Total Bond has no effect on the direction of Proshares Russell i.e., Proshares Russell and Fidelity Total go up and down completely randomly.

Pair Corralation between Proshares Russell and Fidelity Total

Given the investment horizon of 90 days Proshares Russell 2000 is expected to generate 3.63 times more return on investment than Fidelity Total. However, Proshares Russell is 3.63 times more volatile than Fidelity Total Bond. It trades about 0.19 of its potential returns per unit of risk. Fidelity Total Bond is currently generating about -0.03 per unit of risk. If you would invest  3,913  in Proshares Russell 2000 on August 30, 2024 and sell it today you would earn a total of  499.00  from holding Proshares Russell 2000 or generate 12.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Proshares Russell 2000  vs.  Fidelity Total Bond

Proshares Russell 2000

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Proshares Russell 2000 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Proshares Russell displayed solid returns over the last few months and may actually be approaching a breakup point.

Fidelity Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Total Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Fidelity Total is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Proshares Russell and Fidelity Total

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

The idea behind Proshares Russell 2000 and Fidelity Total Bond 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.