Correlation Between ProShares Russell and ProShares

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

By analyzing existing cross correlation between ProShares Russell 2000 and ProShares SP MidCap, you can compare the effects of market volatilities on ProShares Russell and ProShares 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 ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Russell and ProShares.

Diversification Opportunities for ProShares Russell and ProShares

0.66

Correlation Coefficient

ProShares Russell  ProShares

Poor diversification

The 3 months correlation between ProShares and ProShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Russell 2000 and ProShares SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP MidCap 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 2000 are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP MidCap has no effect on the direction of ProShares Russell i.e., ProShares Russell and ProShares go up and down completely randomly.

Pair Corralation between ProShares Russell and ProShares

Given the investment horizon of 90 days ProShares Russell 2000 is expected to generate 1.28 times more return on investment than ProShares. However, ProShares Russell is 1.28 times more volatile than ProShares SP MidCap. It trades about 0.53 of its potential returns per unit of risk. ProShares SP MidCap is currently generating about 0.4 per unit of risk. If you would invest  5,955  in ProShares Russell 2000 on February 16, 2024 and sell it today you would earn a total of  560.55  from holding ProShares Russell 2000 or generate 9.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

ProShares Russell 2000  vs.  ProShares SP MidCap

ProShares Russell 2000

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Russell 2000 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

ProShares SP MidCap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP MidCap are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, ProShares may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with ProShares Russell and ProShares

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

The idea behind ProShares Russell 2000 and ProShares SP MidCap 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.