Correlation Between Vanguard Small and ProShares Ultra

Can any of the company-specific risk be diversified away by investing in both Vanguard Small and ProShares Ultra 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 Ultra 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 Ultra Dow30, you can compare the effects of market volatilities on Vanguard Small and ProShares Ultra 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 Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and ProShares Ultra.

Diversification Opportunities for Vanguard Small and ProShares Ultra

0.99

Correlation Coefficient

Vanguard Small  ProShares Ultra

No risk reduction

The 3 months correlation between Vanguard and ProShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and ProShares Ultra Dow30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Dow30 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 Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra Dow30 has no effect on the direction of Vanguard Small i.e., Vanguard Small and ProShares Ultra go up and down completely randomly.

Pair Corralation between Vanguard Small and ProShares Ultra

Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 1.44 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, Vanguard Small Cap Index is 1.52 times less risky than ProShares Ultra. It trades about 0.21 of its potential returns per unit of risk. ProShares Ultra Dow30 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  8,382  in ProShares Ultra Dow30 on April 30, 2025 and sell it today you would earn a total of  1,722  from holding ProShares Ultra Dow30 or generate 20.54% return on investment over 90 days.

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

Vanguard Small Cap Index  vs.  ProShares Ultra Dow30

Vanguard Small Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Vanguard Small sustained solid returns over the last few months and may actually be approaching a breakup point.

ProShares Ultra Dow30

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Dow30 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, ProShares Ultra displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Small and ProShares Ultra

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

The idea behind Vanguard Small Cap Index and ProShares Ultra Dow30 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.