Correlation Between Vanguard FTSE and ProShares UltraPro

Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and ProShares UltraPro 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 FTSE and ProShares UltraPro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard FTSE Developed and ProShares UltraPro Short, you can compare the effects of market volatilities on Vanguard FTSE and ProShares UltraPro 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 FTSE with a short position of ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and ProShares UltraPro.

Diversification Opportunities for Vanguard FTSE and ProShares UltraPro

-0.84

Correlation Coefficient

Vanguard FTSE  ProShares UltraPro

Pay attention - limited upside

The 3 months correlation between Vanguard and ProShares is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and ProShares UltraPro Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro Short and Vanguard FTSE 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 FTSE Developed are associated (or correlated) with ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro Short has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Vanguard FTSE and ProShares UltraPro

Considering the 90-day investment horizon Vanguard FTSE Developed is expected to under-perform the ProShares UltraPro. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 2.98 times less risky than ProShares UltraPro. The etf trades about -0.08 of its potential returns per unit of risk. The ProShares UltraPro Short is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,310  in ProShares UltraPro Short on February 3, 2024 and sell it today you would earn a total of  411.00  from holding ProShares UltraPro Short or generate 12.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Vanguard FTSE Developed  vs.  ProShares UltraPro Short

Vanguard FTSE Developed

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Developed are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ProShares UltraPro Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraPro Short has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ProShares UltraPro is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard FTSE and ProShares UltraPro

The main advantage of trading using opposite Vanguard FTSE and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, ProShares UltraPro 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 UltraPro will offset losses from the drop in ProShares UltraPro's long position.

The idea behind Vanguard FTSE Developed and ProShares UltraPro Short pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.