Correlation Between Vanguard Russell and ProShares Nasdaq

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

By analyzing existing cross correlation between Vanguard Russell 1000 and ProShares Nasdaq 100 Dorsey, you can compare the effects of market volatilities on Vanguard Russell and ProShares Nasdaq 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 Russell with a short position of ProShares Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and ProShares Nasdaq.

Diversification Opportunities for Vanguard Russell and ProShares Nasdaq

0.89

Correlation Coefficient

Vanguard Russell  ProShares Nasdaq

Very poor diversification

The 3 months correlation between Vanguard and ProShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 1000 and ProShares Nasdaq 100 Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Nasdaq 100 and Vanguard 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 Vanguard Russell 1000 are associated (or correlated) with ProShares Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Nasdaq 100 has no effect on the direction of Vanguard Russell i.e., Vanguard Russell and ProShares Nasdaq go up and down completely randomly.

Pair Corralation between Vanguard Russell and ProShares Nasdaq

Assuming the 90 days horizon Vanguard Russell 1000 is expected to under-perform the ProShares Nasdaq. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Russell 1000 is 1.41 times less risky than ProShares Nasdaq. The etf trades about -0.12 of its potential returns per unit of risk. The ProShares Nasdaq 100 Dorsey is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,661  in ProShares Nasdaq 100 Dorsey on December 22, 2024 and sell it today you would lose (399.00) from holding ProShares Nasdaq 100 Dorsey or give up 8.56% of portfolio value over 90 days.

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

Vanguard Russell 1000  vs.  ProShares Nasdaq 100 Dorsey

Vanguard Russell 1000

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Russell 1000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

ProShares Nasdaq 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Nasdaq 100 Dorsey has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Vanguard Russell and ProShares Nasdaq

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

The idea behind Vanguard Russell 1000 and ProShares Nasdaq 100 Dorsey 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.