Correlation Between Proshares Russell and IShares Morningstar
Can any of the company-specific risk be diversified away by investing in both Proshares Russell and IShares Morningstar 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 IShares Morningstar 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 iShares Morningstar Small Cap, you can compare the effects of market volatilities on Proshares Russell and IShares Morningstar 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 IShares Morningstar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proshares Russell and IShares Morningstar.
Diversification Opportunities for Proshares Russell and IShares Morningstar
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Proshares and IShares is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Proshares Russell 2000 and iShares Morningstar Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Morningstar 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 IShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Morningstar has no effect on the direction of Proshares Russell i.e., Proshares Russell and IShares Morningstar go up and down completely randomly.
Pair Corralation between Proshares Russell and IShares Morningstar
Given the investment horizon of 90 days Proshares Russell 2000 is expected to generate 2.4 times more return on investment than IShares Morningstar. However, Proshares Russell is 2.4 times more volatile than iShares Morningstar Small Cap. It trades about 0.18 of its potential returns per unit of risk. iShares Morningstar Small Cap is currently generating about 0.12 per unit of risk. If you would invest 3,913 in Proshares Russell 2000 on September 2, 2024 and sell it today you would earn a total of 1,405 from holding Proshares Russell 2000 or generate 35.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 49.21% |
| Values | Daily Returns |
Proshares Russell 2000 vs. iShares Morningstar Small Cap
Performance |
| Timeline |
| Proshares Russell 2000 |
| iShares Morningstar |
Proshares Russell and IShares Morningstar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Proshares Russell and IShares Morningstar
The main advantage of trading using opposite Proshares Russell and IShares Morningstar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proshares Russell position performs unexpectedly, IShares Morningstar 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 Morningstar will offset losses from the drop in IShares Morningstar's long position.| Proshares Russell vs. Global X Dow | Proshares Russell vs. AdvisorShares STAR Global | Proshares Russell vs. Global X Funds | Proshares Russell vs. FT Vest Dow |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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