Correlation Between IShares Russell and ProShares Nasdaq

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

By analyzing existing cross correlation between iShares Russell 1000 and ProShares Nasdaq 100 Dorsey, you can compare the effects of market volatilities on IShares Russell and ProShares Nasdaq 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 Russell with a short position of ProShares Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and ProShares Nasdaq.

Diversification Opportunities for IShares Russell and ProShares Nasdaq

0.93

Correlation Coefficient

IShares Russell  ProShares Nasdaq

Almost no diversification

The 3 months correlation between IShares and ProShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 1000 and ProShares Nasdaq 100 Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Nasdaq 100 and IShares 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 iShares Russell 1000 are associated (or correlated) with ProShares Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Nasdaq 100 has no effect on the direction of IShares Russell i.e., IShares Russell and ProShares Nasdaq go up and down completely randomly.

Pair Corralation between IShares Russell and ProShares Nasdaq

Considering the 90-day investment horizon iShares Russell 1000 is expected to generate 0.76 times more return on investment than ProShares Nasdaq. However, iShares Russell 1000 is 1.32 times less risky than ProShares Nasdaq. It trades about 0.13 of its potential returns per unit of risk. ProShares Nasdaq 100 Dorsey is currently generating about 0.06 per unit of risk. If you would invest  21,638  in iShares Russell 1000 on October 10, 2024 and sell it today you would earn a total of  18,800  from holding iShares Russell 1000 or generate 86.88% return on investment over 90 days.

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

iShares Russell 1000  vs.  ProShares Nasdaq 100 Dorsey

iShares Russell 1000

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 1000 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ProShares Nasdaq 100

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Nasdaq 100 Dorsey are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ProShares Nasdaq is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Russell and ProShares Nasdaq

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

The idea behind iShares Russell 1000 and ProShares Nasdaq 100 Dorsey 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.