Correlation Between ProShares and IShares Russell
Can any of the company-specific risk be diversified away by investing in both ProShares and IShares Russell 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 and IShares Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares SP MidCap and iShares Russell 2000, you can compare the effects of market volatilities on ProShares and IShares Russell 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 with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and IShares Russell.
Diversification Opportunities for ProShares and IShares Russell
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ProShares and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP MidCap and iShares Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 2000 and ProShares 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 SP MidCap are associated (or correlated) with IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 2000 has no effect on the direction of ProShares i.e., ProShares and IShares Russell go up and down completely randomly.
Pair Corralation between ProShares and IShares Russell
Given the investment horizon of 90 days ProShares SP MidCap is expected to under-perform the IShares Russell. But the etf apears to be less risky and, when comparing its historical volatility, ProShares SP MidCap is 1.2 times less risky than IShares Russell. The etf trades about -0.55 of its potential returns per unit of risk. The iShares Russell 2000 is currently generating about -0.42 of returns per unit of risk over similar time horizon. If you would invest 18,046 in iShares Russell 2000 on September 24, 2024 and sell it today you would lose (1,660) from holding iShares Russell 2000 or give up 9.2% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
ProShares SP MidCap vs. iShares Russell 2000
Performance |
Timeline |
ProShares SP MidCap |
iShares Russell 2000 |
ProShares and IShares Russell Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ProShares and IShares Russell
The main advantage of trading using opposite ProShares and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares position performs unexpectedly, IShares Russell 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 IShares Russell will offset losses from the drop in IShares Russell's long position.ProShares vs. iShares Russell 2000 | ProShares vs. Dimensional Targeted Value | ProShares vs. SPDR SP 600 | ProShares vs. Avantis Small Cap |
IShares Russell vs. iShares Russell 2000 | IShares Russell vs. iShares Russell 1000 | IShares Russell vs. iShares Russell Mid Cap | IShares Russell vs. iShares Russell 1000 |
Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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