Correlation Between ProShares Russell and WBI Power

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

Diversification Opportunities for ProShares Russell and WBI Power

0.92

Correlation Coefficient

ProShares Russell  WBI Power

Almost no diversification

The 3 months correlation between ProShares and WBI is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Russell Dividend and WBI Power Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WBI Power Factor 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 WBI Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WBI Power Factor has no effect on the direction of ProShares Russell i.e., ProShares Russell and WBI Power go up and down completely randomly.

Pair Corralation between ProShares Russell and WBI Power

Given the investment horizon of 90 days ProShares Russell is expected to generate 2.49 times less return on investment than WBI Power. But when comparing it to its historical volatility, ProShares Russell Dividend is 1.35 times less risky than WBI Power. It trades about 0.03 of its potential returns per unit of risk. WBI Power Factor is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,412  in WBI Power Factor on September 18, 2024 and sell it today you would earn a total of  676.00  from holding WBI Power Factor or generate 28.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

ProShares Russell Dividend  vs.  WBI Power Factor

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.

WBI Power Factor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WBI Power Factor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, WBI Power is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares Russell and WBI Power

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

The idea behind ProShares Russell Dividend and WBI Power Factor 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.