Correlation Between ProShares Short and Vanguard Large

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

By analyzing existing cross correlation between ProShares Short SP500 and Vanguard Large Cap Index, you can compare the effects of market volatilities on ProShares Short and Vanguard Large 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 Short with a short position of Vanguard Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and Vanguard Large.

Diversification Opportunities for ProShares Short and Vanguard Large

-0.92

Correlation Coefficient

ProShares Short  Vanguard Large

Pay attention - limited upside

The 3 months correlation between ProShares and Vanguard is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short SP500 and Vanguard Large Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Large Cap and ProShares Short 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 Short SP500 are associated (or correlated) with Vanguard Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Large Cap has no effect on the direction of ProShares Short i.e., ProShares Short and Vanguard Large go up and down completely randomly.

Pair Corralation between ProShares Short and Vanguard Large

Allowing for the 90-day total investment horizon ProShares Short SP500 is expected to generate 0.96 times more return on investment than Vanguard Large. However, ProShares Short SP500 is 1.04 times less risky than Vanguard Large. It trades about 0.11 of its potential returns per unit of risk. Vanguard Large Cap Index is currently generating about -0.08 per unit of risk. If you would invest  4,190  in ProShares Short SP500 on December 29, 2024 and sell it today you would earn a total of  292.00  from holding ProShares Short SP500 or generate 6.97% return on investment over 90 days.

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

ProShares Short SP500  vs.  Vanguard Large Cap Index

ProShares Short SP500

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Short SP500 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, ProShares Short may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vanguard Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Large Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard Large is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ProShares Short and Vanguard Large

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

The idea behind ProShares Short SP500 and Vanguard Large Cap Index 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.