Correlation Between Vanguard Total and ProShares UltraPro

Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Total 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 Total Bond and ProShares UltraPro SP500, you can compare the effects of market volatilities on Vanguard Total 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 Total with a short position of ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and ProShares UltraPro.

Diversification Opportunities for Vanguard Total and ProShares UltraPro

0.66

Correlation Coefficient

Vanguard Total  ProShares UltraPro

Poor diversification

The 3 months correlation between Vanguard and ProShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Bond and ProShares UltraPro SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro SP500 and Vanguard Total 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 Total Bond 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 SP500 has no effect on the direction of Vanguard Total i.e., Vanguard Total and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Vanguard Total and ProShares UltraPro

Considering the 90-day investment horizon Vanguard Total Bond is expected to generate 0.19 times more return on investment than ProShares UltraPro. However, Vanguard Total Bond is 5.17 times less risky than ProShares UltraPro. It trades about 0.22 of its potential returns per unit of risk. ProShares UltraPro SP500 is currently generating about -0.01 per unit of risk. If you would invest  7,260  in Vanguard Total Bond on May 5, 2025 and sell it today you would earn a total of  99.00  from holding Vanguard Total Bond or generate 1.36% return on investment over 90 days.

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

Vanguard Total Bond  vs.  ProShares UltraPro SP500

Vanguard Total Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Bond are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares UltraPro SP500

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro SP500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, ProShares UltraPro displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Total and ProShares UltraPro

The main advantage of trading using opposite Vanguard Total and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total Bond and ProShares UltraPro SP500 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.