Correlation Between Vanguard FTSE and ProShares UltraPro

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

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

Diversification Opportunities for Vanguard FTSE and ProShares UltraPro

-0.49

Correlation Coefficient

Vanguard FTSE  ProShares UltraPro

Very good diversification

The 3 months correlation between Vanguard and ProShares is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging and ProShares UltraPro SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro SP500 and Vanguard FTSE 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 FTSE Emerging are associated (or correlated) with ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro SP500 has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Vanguard FTSE and ProShares UltraPro

Considering the 90-day investment horizon Vanguard FTSE is expected to generate 5.16 times less return on investment than ProShares UltraPro. But when comparing it to its historical volatility, Vanguard FTSE Emerging is 2.55 times less risky than ProShares UltraPro. It trades about 0.05 of its potential returns per unit of risk. ProShares UltraPro SP500 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,258  in ProShares UltraPro SP500 on October 5, 2024 and sell it today you would earn a total of  5,867  from holding ProShares UltraPro SP500 or generate 180.08% return on investment over 90 days.

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

Vanguard FTSE Emerging  vs.  ProShares UltraPro SP500

Vanguard FTSE Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

ProShares UltraPro SP500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro SP500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, ProShares UltraPro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vanguard FTSE and ProShares UltraPro

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

The idea behind Vanguard FTSE Emerging and ProShares UltraPro SP500 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.