Correlation Between Proshares Russell and American Century
Can any of the company-specific risk be diversified away by investing in both Proshares Russell and American Century 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 American Century 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 American Century Diversified, you can compare the effects of market volatilities on Proshares Russell and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proshares Russell and American Century.
Diversification Opportunities for Proshares Russell and American Century
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Proshares and American is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Proshares Russell 2000 and American Century Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Div 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Div has no effect on the direction of Proshares Russell i.e., Proshares Russell and American Century go up and down completely randomly.
Pair Corralation between Proshares Russell and American Century
Given the investment horizon of 90 days Proshares Russell 2000 is expected to generate 2.52 times more return on investment than American Century. However, Proshares Russell is 2.52 times more volatile than American Century Diversified. It trades about 0.23 of its potential returns per unit of risk. American Century Diversified is currently generating about 0.05 per unit of risk. If you would invest 4,175 in Proshares Russell 2000 on August 28, 2024 and sell it today you would earn a total of 245.00 from holding Proshares Russell 2000 or generate 5.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Proshares Russell 2000 vs. American Century Diversified
Performance |
| Timeline |
| Proshares Russell 2000 |
| American Century Div |
Proshares Russell and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Proshares Russell and American Century
The main advantage of trading using opposite Proshares Russell and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proshares Russell position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century's long position.The idea behind Proshares Russell 2000 and American Century Diversified 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.| American Century vs. iShares Edge Investment | American Century vs. American Century STOXX | American Century vs. iShares Inflation Hedged | American Century vs. Franklin Liberty Investment |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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