Correlation Between Vanguard Dividend and ProShares

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

By analyzing existing cross correlation between Vanguard Dividend Appreciation and ProShares SP 500, you can compare the effects of market volatilities on Vanguard Dividend and ProShares 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 Dividend with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Dividend and ProShares.

Diversification Opportunities for Vanguard Dividend and ProShares

0.81

Correlation Coefficient

Vanguard Dividend  ProShares

Very poor diversification

The 3 months correlation between Vanguard and ProShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Dividend Appreciation and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 and Vanguard Dividend 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 Dividend Appreciation are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP 500 has no effect on the direction of Vanguard Dividend i.e., Vanguard Dividend and ProShares go up and down completely randomly.

Pair Corralation between Vanguard Dividend and ProShares

Considering the 90-day investment horizon Vanguard Dividend Appreciation is expected to generate 0.68 times more return on investment than ProShares. However, Vanguard Dividend Appreciation is 1.46 times less risky than ProShares. It trades about -0.03 of its potential returns per unit of risk. ProShares SP 500 is currently generating about -0.09 per unit of risk. If you would invest  19,486  in Vanguard Dividend Appreciation on December 30, 2024 and sell it today you would lose (292.00) from holding Vanguard Dividend Appreciation or give up 1.5% of portfolio value over 90 days.

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

Vanguard Dividend Appreciation  vs.  ProShares SP 500

Vanguard Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Dividend Appreciation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Vanguard Dividend is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

ProShares SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Vanguard Dividend and ProShares

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

The idea behind Vanguard Dividend Appreciation and ProShares SP 500 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.