Correlation Between Proshares Russell and WisdomTree CBOE
Can any of the company-specific risk be diversified away by investing in both Proshares Russell and WisdomTree CBOE 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 WisdomTree CBOE 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 WisdomTree CBOE SP, you can compare the effects of market volatilities on Proshares Russell and WisdomTree CBOE 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 WisdomTree CBOE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proshares Russell and WisdomTree CBOE.
Diversification Opportunities for Proshares Russell and WisdomTree CBOE
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Proshares and WisdomTree is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Proshares Russell 2000 and WisdomTree CBOE SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree CBOE SP 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 WisdomTree CBOE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree CBOE SP has no effect on the direction of Proshares Russell i.e., Proshares Russell and WisdomTree CBOE go up and down completely randomly.
Pair Corralation between Proshares Russell and WisdomTree CBOE
Given the investment horizon of 90 days Proshares Russell 2000 is expected to generate 1.9 times more return on investment than WisdomTree CBOE. However, Proshares Russell is 1.9 times more volatile than WisdomTree CBOE SP. It trades about 0.22 of its potential returns per unit of risk. WisdomTree CBOE SP is currently generating about 0.09 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 Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Proshares Russell 2000 vs. WisdomTree CBOE SP
Performance |
| Timeline |
| Proshares Russell 2000 |
| WisdomTree CBOE SP |
Proshares Russell and WisdomTree CBOE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Proshares Russell and WisdomTree CBOE
The main advantage of trading using opposite Proshares Russell and WisdomTree CBOE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proshares Russell position performs unexpectedly, WisdomTree CBOE 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 WisdomTree CBOE will offset losses from the drop in WisdomTree CBOE'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 |
| WisdomTree CBOE vs. Invesco SP 500 | WisdomTree CBOE vs. WisdomTree Managed Futures | WisdomTree CBOE vs. SPDR MSCI Emerging | WisdomTree CBOE vs. WisdomTree Dynamic Currency |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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