Correlation Between ProShares Trust and Vanguard World
Can any of the company-specific risk be diversified away by investing in both ProShares Trust and Vanguard World 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 Trust and Vanguard World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Trust and Vanguard World, you can compare the effects of market volatilities on ProShares Trust and Vanguard World 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 Trust with a short position of Vanguard World. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Trust and Vanguard World.
Diversification Opportunities for ProShares Trust and Vanguard World
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and Vanguard is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and Vanguard World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard World and ProShares Trust 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 Trust are associated (or correlated) with Vanguard World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard World has no effect on the direction of ProShares Trust i.e., ProShares Trust and Vanguard World go up and down completely randomly.
Pair Corralation between ProShares Trust and Vanguard World
Assuming the 90 days trading horizon ProShares Trust is expected to generate 2.4 times more return on investment than Vanguard World. However, ProShares Trust is 2.4 times more volatile than Vanguard World. It trades about 0.19 of its potential returns per unit of risk. Vanguard World is currently generating about 0.12 per unit of risk. If you would invest 183,777 in ProShares Trust on September 12, 2024 and sell it today you would earn a total of 51,662 from holding ProShares Trust or generate 28.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.39% |
| Values | Daily Returns |
ProShares Trust vs. Vanguard World
Performance |
| Timeline |
| ProShares Trust |
| Vanguard World |
ProShares Trust and Vanguard World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Trust and Vanguard World
The main advantage of trading using opposite ProShares Trust and Vanguard World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Trust position performs unexpectedly, Vanguard World 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 Vanguard World will offset losses from the drop in Vanguard World's long position.| ProShares Trust vs. ProShares Trust | ProShares Trust vs. ProShares Trust | ProShares Trust vs. ProShares Trust | ProShares Trust vs. ProShares Trust |
| Vanguard World vs. Vanguard Index Funds | Vanguard World vs. Vanguard Index Funds | Vanguard World vs. Vanguard STAR Funds | Vanguard World vs. SPDR SP 500 |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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