Correlation Between Proshares Russell and Simplify Volatility

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

Diversification Opportunities for Proshares Russell and Simplify Volatility

0.83

Correlation Coefficient

Proshares Russell  Simplify Volatility

Very poor diversification

The 3 months correlation between Proshares and Simplify is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Proshares Russell 2000 and Simplify Volatility Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Volatility 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 Simplify Volatility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Volatility has no effect on the direction of Proshares Russell i.e., Proshares Russell and Simplify Volatility go up and down completely randomly.

Pair Corralation between Proshares Russell and Simplify Volatility

Given the investment horizon of 90 days Proshares Russell is expected to generate 1.05 times less return on investment than Simplify Volatility. But when comparing it to its historical volatility, Proshares Russell 2000 is 1.23 times less risky than Simplify Volatility. It trades about 0.01 of its potential returns per unit of risk. Simplify Volatility Premium is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,687  in Simplify Volatility Premium on March 26, 2025 and sell it today you would earn a total of  53.00  from holding Simplify Volatility Premium or generate 3.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	40.4%
Values	Daily Returns

Proshares Russell 2000  vs.  Simplify Volatility Premium

Proshares Russell 2000

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Proshares Russell 2000 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Proshares Russell is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Simplify Volatility

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simplify Volatility Premium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Simplify Volatility is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Proshares Russell and Simplify Volatility

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

The idea behind Proshares Russell 2000 and Simplify Volatility Premium 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.