Correlation Between ProShares UltraShort and IShares Russell
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort 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 UltraShort 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 UltraShort SP500 and iShares Russell 1000, you can compare the effects of market volatilities on ProShares UltraShort 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 UltraShort with a short position of IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and IShares Russell.
Diversification Opportunities for ProShares UltraShort and IShares Russell
-0.92 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and IShares is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SP500 and iShares Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 1000 and ProShares UltraShort 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 UltraShort SP500 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 1000 has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and IShares Russell go up and down completely randomly.
Pair Corralation between ProShares UltraShort and IShares Russell
Considering the 90-day investment horizon ProShares UltraShort SP500 is expected to under-perform the IShares Russell. In addition to that, ProShares UltraShort is 2.2 times more volatile than iShares Russell 1000. It trades about -0.03 of its total potential returns per unit of risk. iShares Russell 1000 is currently generating about 0.03 per unit of volatility. If you would invest 15,137 in iShares Russell 1000 on January 25, 2024 and sell it today you would earn a total of 2,229 from holding iShares Russell 1000 or generate 14.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
ProShares UltraShort SP500 vs. iShares Russell 1000
Performance |
| Timeline |
| ProShares UltraShort |
| iShares Russell 1000 |
ProShares UltraShort and IShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and IShares Russell
The main advantage of trading using opposite ProShares UltraShort and IShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort 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.The idea behind ProShares UltraShort SP500 and iShares Russell 1000 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.| IShares Russell vs. Northern Lights | IShares Russell vs. HUMANA INC | IShares Russell vs. Aquagold International | IShares Russell vs. Barloworld Ltd ADR |
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 Stocks Directory module to find actively traded stocks across global markets.
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