Correlation Between Vanguard Growth and ProShares UltraShort

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

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

Diversification Opportunities for Vanguard Growth and ProShares UltraShort

-0.92

Correlation Coefficient

Vanguard Growth  ProShares UltraShort

Pay attention - limited upside

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

Pair Corralation between Vanguard Growth and ProShares UltraShort

Considering the 90-day investment horizon Vanguard Growth Index is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Growth Index is 2.04 times less risky than ProShares UltraShort. The etf trades about -0.09 of its potential returns per unit of risk. The ProShares UltraShort Consumer is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  900.00  in ProShares UltraShort Consumer on December 29, 2024 and sell it today you would earn a total of  277.00  from holding ProShares UltraShort Consumer or generate 30.78% return on investment over 90 days.

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

Vanguard Growth Index  vs.  ProShares UltraShort Consumer

Vanguard Growth Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Growth Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

ProShares UltraShort

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraShort Consumer are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, ProShares UltraShort exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard Growth and ProShares UltraShort

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

The idea behind Vanguard Growth Index and ProShares UltraShort Consumer 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.