Correlation Between Vanguard Small and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and ProShares UltraShort 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 Vanguard Small and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and ProShares UltraShort 7 10, you can compare the effects of market volatilities on Vanguard Small and ProShares UltraShort 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 Vanguard Small with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and ProShares UltraShort.
Diversification Opportunities for Vanguard Small and ProShares UltraShort
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and ProShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and ProShares UltraShort 7 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Vanguard Small 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 Vanguard Small Cap Index are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of Vanguard Small i.e., Vanguard Small and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Vanguard Small and ProShares UltraShort
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 1.11 times more return on investment than ProShares UltraShort. However, Vanguard Small is 1.11 times more volatile than ProShares UltraShort 7 10. It trades about 0.08 of its potential returns per unit of risk. ProShares UltraShort 7 10 is currently generating about 0.03 per unit of risk. If you would invest 18,985 in Vanguard Small Cap Index on September 1, 2024 and sell it today you would earn a total of 7,066 from holding Vanguard Small Cap Index or generate 37.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. ProShares UltraShort 7 10
Performance |
| Timeline |
| Vanguard Small Cap |
| ProShares UltraShort |
Vanguard Small and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and ProShares UltraShort
The main advantage of trading using opposite Vanguard Small and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, ProShares UltraShort 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 ProShares UltraShort will offset losses from the drop in ProShares UltraShort's long position.| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard FTSE Emerging | Vanguard Small vs. Vanguard Large Cap Index |
| ProShares UltraShort vs. ProShares UltraShort 20 | ProShares UltraShort vs. ProShares UltraShort MSCI | ProShares UltraShort vs. ProShares Short 20 | ProShares UltraShort vs. ProShares UltraShort Health |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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