Correlation Between Proshares Russell and JPMorgan Core

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

Diversification Opportunities for Proshares Russell and JPMorgan Core

-0.14

Correlation Coefficient

Proshares Russell  JPMorgan Core

Good diversification

The 3 months correlation between Proshares and JPMorgan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Proshares Russell 2000 and JPMorgan Core Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Core Plus 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 JPMorgan Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Core Plus has no effect on the direction of Proshares Russell i.e., Proshares Russell and JPMorgan Core go up and down completely randomly.

Pair Corralation between Proshares Russell and JPMorgan Core

Given the investment horizon of 90 days Proshares Russell 2000 is expected to generate 9.94 times more return on investment than JPMorgan Core. However, Proshares Russell is 9.94 times more volatile than JPMorgan Core Plus. It trades about 0.19 of its potential returns per unit of risk. JPMorgan Core Plus is currently generating about -0.02 per unit of risk. If you would invest  3,913  in Proshares Russell 2000 on September 1, 2024 and sell it today you would earn a total of  1,405  from holding Proshares Russell 2000 or generate 35.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Proshares Russell 2000  vs.  JPMorgan Core Plus

Proshares Russell 2000

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Proshares Russell 2000 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Proshares Russell displayed solid returns over the last few months and may actually be approaching a breakup point.

JPMorgan Core Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JPMorgan Core Plus has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, JPMorgan Core is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Proshares Russell and JPMorgan Core

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

The idea behind Proshares Russell 2000 and JPMorgan Core Plus 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.