Correlation Between ProShares Russell and Global X

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

By analyzing existing cross correlation between ProShares Russell Dividend and Global X MSCI, you can compare the effects of market volatilities on ProShares Russell and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Russell and Global X.

Diversification Opportunities for ProShares Russell and Global X

0.01

Correlation Coefficient

ProShares Russell  Global X

Significant diversification

The 3 months correlation between ProShares and Global is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Russell Dividend and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI 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 Dividend are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X MSCI has no effect on the direction of ProShares Russell i.e., ProShares Russell and Global X go up and down completely randomly.

Pair Corralation between ProShares Russell and Global X

Given the investment horizon of 90 days ProShares Russell Dividend is expected to generate 0.66 times more return on investment than Global X. However, ProShares Russell Dividend is 1.53 times less risky than Global X. It trades about -0.08 of its potential returns per unit of risk. Global X MSCI is currently generating about -0.14 per unit of risk. If you would invest  4,866  in ProShares Russell Dividend on October 7, 2024 and sell it today you would lose (204.00) from holding ProShares Russell Dividend or give up 4.19% of portfolio value over 90 days.

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

ProShares Russell Dividend  vs.  Global X MSCI

ProShares Russell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Russell Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, ProShares Russell is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Global X MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with ProShares Russell and Global X

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

The idea behind ProShares Russell Dividend and Global X MSCI 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.