Correlation Between ProShares Trust and Vanguard Small

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

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

Diversification Opportunities for ProShares Trust and Vanguard Small

-0.76

Correlation Coefficient

ProShares Trust  Vanguard Small

Pay attention - limited upside

The 3 months correlation between ProShares and Vanguard is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and Vanguard Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and ProShares Trust 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 Trust are associated (or correlated) with Vanguard Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Small Cap has no effect on the direction of ProShares Trust i.e., ProShares Trust and Vanguard Small go up and down completely randomly.

Pair Corralation between ProShares Trust and Vanguard Small

Given the investment horizon of 90 days ProShares Trust is expected to under-perform the Vanguard Small. In addition to that, ProShares Trust is 3.56 times more volatile than Vanguard Small Cap Value. It trades about -0.07 of its total potential returns per unit of risk. Vanguard Small Cap Value is currently generating about 0.13 per unit of volatility. If you would invest  19,270  in Vanguard Small Cap Value on July 6, 2024 and sell it today you would earn a total of  466.00  from holding Vanguard Small Cap Value or generate 2.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

ProShares Trust   vs.  Vanguard Small Cap Value

ProShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Vanguard Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with ProShares Trust and Vanguard Small

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

The idea behind ProShares Trust and Vanguard Small Cap Value 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.