Correlation Between Principal Value and ProShares Russell
Can any of the company-specific risk be diversified away by investing in both Principal Value and ProShares 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 Principal Value and ProShares Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Principal Value ETF and ProShares Russell 2000, you can compare the effects of market volatilities on Principal Value and ProShares 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 Principal Value with a short position of ProShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Value and ProShares Russell.
Diversification Opportunities for Principal Value and ProShares Russell
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Principal and ProShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Principal Value ETF and ProShares Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Russell 2000 and Principal Value 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 Principal Value ETF are associated (or correlated) with ProShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Russell 2000 has no effect on the direction of Principal Value i.e., Principal Value and ProShares Russell go up and down completely randomly.
Pair Corralation between Principal Value and ProShares Russell
Allowing for the 90-day total investment horizon Principal Value ETF is expected to generate 0.62 times more return on investment than ProShares Russell. However, Principal Value ETF is 1.6 times less risky than ProShares Russell. It trades about 0.08 of its potential returns per unit of risk. ProShares Russell 2000 is currently generating about 0.04 per unit of risk. If you would invest 3,680 in Principal Value ETF on December 11, 2024 and sell it today you would earn a total of 1,216 from holding Principal Value ETF or generate 33.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Principal Value ETF vs. ProShares Russell 2000
Performance |
| Timeline |
| Principal Value ETF |
| ProShares Russell 2000 |
Principal Value and ProShares Russell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Principal Value and ProShares Russell
The main advantage of trading using opposite Principal Value and ProShares Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Value position performs unexpectedly, ProShares 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 ProShares Russell will offset losses from the drop in ProShares Russell's long position.| Principal Value vs. Principal Quality ETF | ||
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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