Correlation Between ProShares and Vanguard Multifactor
Can any of the company-specific risk be diversified away by investing in both ProShares and Vanguard Multifactor 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 and Vanguard Multifactor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares SP MidCap and Vanguard Multifactor, you can compare the effects of market volatilities on ProShares and Vanguard Multifactor 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 with a short position of Vanguard Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and Vanguard Multifactor.
Diversification Opportunities for ProShares and Vanguard Multifactor
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ProShares and Vanguard is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP MidCap and Vanguard Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Multifactor and ProShares 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 SP MidCap are associated (or correlated) with Vanguard Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Multifactor has no effect on the direction of ProShares i.e., ProShares and Vanguard Multifactor go up and down completely randomly.
Pair Corralation between ProShares and Vanguard Multifactor
Given the investment horizon of 90 days ProShares SP MidCap is expected to generate 0.97 times more return on investment than Vanguard Multifactor. However, ProShares SP MidCap is 1.04 times less risky than Vanguard Multifactor. It trades about 0.28 of its potential returns per unit of risk. Vanguard Multifactor is currently generating about 0.26 per unit of risk. If you would invest 8,176 in ProShares SP MidCap on August 28, 2024 and sell it today you would earn a total of 629.00 from holding ProShares SP MidCap or generate 7.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares SP MidCap vs. Vanguard Multifactor
Performance |
| Timeline |
| ProShares SP MidCap |
| Vanguard Multifactor |
ProShares and Vanguard Multifactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares and Vanguard Multifactor
The main advantage of trading using opposite ProShares and Vanguard Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares position performs unexpectedly, Vanguard Multifactor 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 Multifactor will offset losses from the drop in Vanguard Multifactor's long position.| ProShares vs. ProShares Russell 2000 | ProShares vs. ProShares MSCI EAFE | ProShares vs. ProShares MSCI Emerging | ProShares vs. ProShares MSCI Europe |
| Vanguard Multifactor vs. Vanguard Quality Factor | Vanguard Multifactor vs. Vanguard Momentum Factor | Vanguard Multifactor vs. Vanguard Value Factor | Vanguard Multifactor vs. Vanguard Minimum Volatility |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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