Correlation Between ProShares UltraShort and Vanguard Multifactor
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort 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 UltraShort 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 UltraShort SmallCap600 and Vanguard Multifactor, you can compare the effects of market volatilities on ProShares UltraShort 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 UltraShort with a short position of Vanguard Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Vanguard Multifactor.
Diversification Opportunities for ProShares UltraShort and Vanguard Multifactor
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and Vanguard is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SmallCap6 and Vanguard Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Multifactor and ProShares UltraShort 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 UltraShort SmallCap600 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 UltraShort i.e., ProShares UltraShort and Vanguard Multifactor go up and down completely randomly.
Pair Corralation between ProShares UltraShort and Vanguard Multifactor
Considering the 90-day investment horizon ProShares UltraShort SmallCap600 is expected to generate 3.03 times more return on investment than Vanguard Multifactor. However, ProShares UltraShort is 3.03 times more volatile than Vanguard Multifactor. It trades about 0.23 of its potential returns per unit of risk. Vanguard Multifactor is currently generating about -0.28 per unit of risk. If you would invest 1,846 in ProShares UltraShort SmallCap600 on January 20, 2024 and sell it today you would earn a total of 216.00 from holding ProShares UltraShort SmallCap600 or generate 11.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort SmallCap6 vs. Vanguard Multifactor
Performance |
| Timeline |
| ProShares UltraShort |
| Vanguard Multifactor |
ProShares UltraShort and Vanguard Multifactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and Vanguard Multifactor
The main advantage of trading using opposite ProShares UltraShort and Vanguard Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort 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 UltraShort vs. ProShares Ultra SP500 | ProShares UltraShort vs. HUMANA INC | ProShares UltraShort vs. Aquagold International | ProShares UltraShort vs. Thrivent High Yield |
| Vanguard Multifactor vs. Vanguard Small Cap Index | Vanguard Multifactor vs. Vanguard Large Cap Index | Vanguard Multifactor vs. Vanguard Small Cap Growth | Vanguard Multifactor vs. Vanguard Small Cap Value |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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