Correlation Between Proshares Russell and IShares IBonds

Can any of the company-specific risk be diversified away by investing in both Proshares Russell and IShares IBonds 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 IBonds 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 iBonds Dec, you can compare the effects of market volatilities on Proshares Russell and IShares IBonds 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 IBonds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proshares Russell and IShares IBonds.

Diversification Opportunities for Proshares Russell and IShares IBonds

0.38

Correlation Coefficient

Proshares Russell  IShares IBonds

Weak diversification

The 3 months correlation between Proshares and IShares is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Proshares Russell 2000 and iShares iBonds Dec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBonds Dec 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 IBonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBonds Dec has no effect on the direction of Proshares Russell i.e., Proshares Russell and IShares IBonds go up and down completely randomly.

Pair Corralation between Proshares Russell and IShares IBonds

Given the investment horizon of 90 days Proshares Russell 2000 is expected to generate 58.68 times more return on investment than IShares IBonds. However, Proshares Russell is 58.68 times more volatile than iShares iBonds Dec. It trades about 0.06 of its potential returns per unit of risk. iShares iBonds Dec is currently generating about 0.13 per unit of risk. If you would invest  3,887  in Proshares Russell 2000 on September 12, 2024 and sell it today you would earn a total of  398.00  from holding Proshares Russell 2000 or generate 10.24% 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.  iShares iBonds Dec

Proshares Russell 2000

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Proshares Russell 2000 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Proshares Russell displayed solid returns over the last few months and may actually be approaching a breakup point.

iShares iBonds Dec

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBonds Dec are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, IShares IBonds is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Proshares Russell and IShares IBonds

The main advantage of trading using opposite Proshares Russell and IShares IBonds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proshares Russell position performs unexpectedly, IShares IBonds 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 IBonds will offset losses from the drop in IShares IBonds' long position.

The idea behind Proshares Russell 2000 and iShares iBonds Dec 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.