Correlation Between ProShares Smart and Vanguard Industrials
Can any of the company-specific risk be diversified away by investing in both ProShares Smart and Vanguard Industrials 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 Smart and Vanguard Industrials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Smart Materials and Vanguard Industrials Index, you can compare the effects of market volatilities on ProShares Smart and Vanguard Industrials 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 Smart with a short position of Vanguard Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Smart and Vanguard Industrials.
Diversification Opportunities for ProShares Smart and Vanguard Industrials
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ProShares and Vanguard is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Smart Materials and Vanguard Industrials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Industrials and ProShares Smart 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 Smart Materials are associated (or correlated) with Vanguard Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Industrials has no effect on the direction of ProShares Smart i.e., ProShares Smart and Vanguard Industrials go up and down completely randomly.
Pair Corralation between ProShares Smart and Vanguard Industrials
Given the investment horizon of 90 days ProShares Smart Materials is expected to under-perform the Vanguard Industrials. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Smart Materials is 1.44 times less risky than Vanguard Industrials. The etf trades about -0.08 of its potential returns per unit of risk. The Vanguard Industrials Index is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 25,837 in Vanguard Industrials Index on September 4, 2024 and sell it today you would earn a total of 1,911 from holding Vanguard Industrials Index or generate 7.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Smart Materials vs. Vanguard Industrials Index
Performance |
| Timeline |
| ProShares Smart Materials |
| Vanguard Industrials |
ProShares Smart and Vanguard Industrials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Smart and Vanguard Industrials
The main advantage of trading using opposite ProShares Smart and Vanguard Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Smart position performs unexpectedly, Vanguard Industrials 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 Industrials will offset losses from the drop in Vanguard Industrials' long position.| ProShares Smart vs. Vanguard Industrials Index | ProShares Smart vs. Vanguard Communication Services | ProShares Smart vs. Vanguard Consumer Discretionary | ProShares Smart vs. Vanguard Consumer Staples |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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