Correlation Between ProShares Ultra and Vanguard Short

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

Diversification Opportunities for ProShares Ultra and Vanguard Short

-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between ProShares and Vanguard is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and Vanguard Short Term Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term 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 Semiconductors 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 Ultra i.e., ProShares Ultra and Vanguard Short go up and down completely randomly.

Pair Corralation between ProShares Ultra and Vanguard Short

Considering the 90-day investment horizon ProShares Ultra Semiconductors is expected to generate 53.01 times more return on investment than Vanguard Short. However, ProShares Ultra is 53.01 times more volatile than Vanguard Short Term Inflation Protected. It trades about 0.01 of its potential returns per unit of risk. Vanguard Short Term Inflation Protected is currently generating about 0.16 per unit of risk. If you would invest  8,144  in ProShares Ultra Semiconductors on October 8, 2024 and sell it today you would lose (954.00) from holding ProShares Ultra Semiconductors or give up 11.71% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ProShares Ultra Semiconductors  vs.  Vanguard Short Term Inflation

 Performance 
       Timeline  
ProShares Ultra Semi 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, ProShares Ultra may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Vanguard Short Term 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Inflation Protected are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Vanguard Short is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

ProShares Ultra and Vanguard Short Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares Ultra and Vanguard Short

The main advantage of trading using opposite ProShares Ultra and Vanguard Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra 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 Ultra Semiconductors and Vanguard Short Term Inflation Protected 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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