Correlation Between ProShares Russell and ProShares MSCI
Can any of the company-specific risk be diversified away by investing in both ProShares Russell and ProShares MSCI 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 MSCI 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 MSCI EAFE, you can compare the effects of market volatilities on ProShares Russell and ProShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Russell and ProShares MSCI.
Diversification Opportunities for ProShares Russell and ProShares MSCI
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between ProShares and ProShares is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Russell 2000 and ProShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares MSCI EAFE 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares MSCI EAFE has no effect on the direction of ProShares Russell i.e., ProShares Russell and ProShares MSCI go up and down completely randomly.
Pair Corralation between ProShares Russell and ProShares MSCI
Given the investment horizon of 90 days ProShares Russell 2000 is expected to generate 1.63 times more return on investment than ProShares MSCI. However, ProShares Russell is 1.63 times more volatile than ProShares MSCI EAFE. It trades about 0.04 of its potential returns per unit of risk. ProShares MSCI EAFE is currently generating about 0.03 per unit of risk. If you would invest 6,012 in ProShares Russell 2000 on August 27, 2024 and sell it today you would earn a total of 1,485 from holding ProShares Russell 2000 or generate 24.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Russell 2000 vs. ProShares MSCI EAFE
Performance |
| Timeline |
| ProShares Russell 2000 |
| ProShares MSCI EAFE |
ProShares Russell and ProShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Russell and ProShares MSCI
The main advantage of trading using opposite ProShares Russell and ProShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Russell position performs unexpectedly, ProShares MSCI 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 MSCI will offset losses from the drop in ProShares MSCI's long position.| ProShares Russell vs. Dimensional ETF Trust | ProShares Russell vs. Vanguard Small Cap Index | ProShares Russell vs. First Trust Multi Manager | ProShares Russell vs. Vanguard SP Small Cap |
| ProShares MSCI vs. Dimensional Core Equity | ProShares MSCI vs. Dimensional Emerging Core | ProShares MSCI vs. Dimensional Targeted Value | ProShares MSCI vs. Dimensional Small Cap |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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