Correlation Between ProShares Ultra and Vanguard Small

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

Diversification Opportunities for ProShares Ultra and Vanguard Small

0.77

Correlation Coefficient

ProShares Ultra  Vanguard Small

Poor diversification

The 3 months correlation between ProShares and Vanguard is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Oil and Vanguard Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Small Cap and ProShares Ultra 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 Ultra Oil 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 Ultra i.e., ProShares Ultra and Vanguard Small go up and down completely randomly.

Pair Corralation between ProShares Ultra and Vanguard Small

Considering the 90-day investment horizon ProShares Ultra Oil is expected to generate 2.26 times more return on investment than Vanguard Small. However, ProShares Ultra is 2.26 times more volatile than Vanguard Small Cap Growth. It trades about 0.1 of its potential returns per unit of risk. Vanguard Small Cap Growth is currently generating about 0.18 per unit of risk. If you would invest  3,113  in ProShares Ultra Oil on May 2, 2025 and sell it today you would earn a total of  424.00  from holding ProShares Ultra Oil or generate 13.62% return on investment over 90 days.

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

ProShares Ultra Oil  vs.  Vanguard Small Cap Growth

ProShares Ultra Oil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Oil are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, ProShares Ultra reported solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Small Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental drivers, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with ProShares Ultra and Vanguard Small

The main advantage of trading using opposite ProShares Ultra and Vanguard Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra 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 Ultra Oil and Vanguard Small Cap Growth 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.