Correlation Between Proshares Russell and Vanguard Short

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

By analyzing existing cross correlation between Proshares Russell 2000 and Vanguard Short Term Treasury, you can compare the effects of market volatilities on Proshares Russell and Vanguard 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 Proshares Russell with a short position of Vanguard Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proshares Russell and Vanguard Short.

Diversification Opportunities for Proshares Russell and Vanguard Short

-0.1

Correlation Coefficient

Proshares Russell  Vanguard Short

Good diversification

The 3 months correlation between Proshares and Vanguard is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Proshares Russell 2000 and Vanguard Short Term Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term and Proshares Russell 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 Russell 2000 are associated (or correlated) with Vanguard Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of Proshares Russell i.e., Proshares Russell and Vanguard Short go up and down completely randomly.

Pair Corralation between Proshares Russell and Vanguard Short

Given the investment horizon of 90 days Proshares Russell 2000 is expected to generate 43.43 times more return on investment than Vanguard Short. However, Proshares Russell is 43.43 times more volatile than Vanguard Short Term Treasury. It trades about 0.01 of its potential returns per unit of risk. Vanguard Short Term Treasury is currently generating about -0.02 per unit of risk. If you would invest  3,913  in Proshares Russell 2000 on September 4, 2024 and sell it today you would lose (132.00) from holding Proshares Russell 2000 or give up 3.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Proshares Russell 2000  vs.  Vanguard Short Term Treasury

Proshares Russell 2000

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Proshares Russell 2000 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Proshares Russell is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Vanguard Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Short Term Treasury has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vanguard Short is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Proshares Russell and Vanguard Short

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

The idea behind Proshares Russell 2000 and Vanguard Short Term Treasury 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.