Correlation Between Vanguard Small and ProShares Short

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

Diversification Opportunities for Vanguard Small and ProShares Short

-0.96

Correlation Coefficient

Vanguard Small  ProShares Short

Pay attention - limited upside

The 3 months correlation between Vanguard and ProShares is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and ProShares Short Dow30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short Dow30 has no effect on the direction of Vanguard Small i.e., Vanguard Small and ProShares Short go up and down completely randomly.

Pair Corralation between Vanguard Small and ProShares Short

Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 1.39 times more return on investment than ProShares Short. However, Vanguard Small is 1.39 times more volatile than ProShares Short Dow30. It trades about 0.17 of its potential returns per unit of risk. ProShares Short Dow30 is currently generating about -0.16 per unit of risk. If you would invest  22,770  in Vanguard Small Cap Index on May 28, 2025 and sell it today you would earn a total of  2,281  from holding Vanguard Small Cap Index or generate 10.02% return on investment over 90 days.

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

Vanguard Small Cap Index  vs.  ProShares Short Dow30

Vanguard Small Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Vanguard Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

ProShares Short Dow30

Risk-Adjusted Performance

Weakest

Over the last 90 days ProShares Short Dow30 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with Vanguard Small and ProShares Short

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

The idea behind Vanguard Small Cap Index and ProShares Short 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.