Correlation Between Vanguard Small and ProShares Short
Can any of the company-specific risk be diversified away by investing in both Vanguard Small and ProShares Short 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 Short 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 Short SP500, you can compare the effects of market volatilities on Vanguard Small and ProShares Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and ProShares Short.
Diversification Opportunities for Vanguard Small and ProShares Short
-0.93 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Vanguard and ProShares is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and ProShares Short SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short SP500 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short SP500 has no effect on the direction of Vanguard Small i.e., Vanguard Small and ProShares Short go up and down completely randomly.
Pair Corralation between Vanguard Small and ProShares Short
Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 1.24 times more return on investment than ProShares Short. However, Vanguard Small is 1.24 times more volatile than ProShares Short SP500. It trades about 0.03 of its potential returns per unit of risk. ProShares Short SP500 is currently generating about -0.02 per unit of risk. If you would invest 18,964 in Vanguard Small Cap Index on January 25, 2024 and sell it today you would earn a total of 2,706 from holding Vanguard Small Cap Index or generate 14.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. ProShares Short SP500
Performance |
| Timeline |
| Vanguard Small Cap |
| ProShares Short SP500 |
Vanguard Small and ProShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and ProShares Short
The main advantage of trading using opposite Vanguard Small and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small position performs unexpectedly, ProShares Short 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 Short will offset losses from the drop in ProShares Short's long position.| Vanguard Small vs. First Trust RiverFront | Vanguard Small vs. First Trust RiverFront | Vanguard Small vs. Arrow DWA Tactical | Vanguard Small vs. First Trust Developed |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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