Correlation Between Vanguard STAR and ProShares Trust

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

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

Diversification Opportunities for Vanguard STAR and ProShares Trust

0.32

Correlation Coefficient

Vanguard STAR  ProShares Trust

Weak diversification

The 3 months correlation between Vanguard and ProShares is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard STAR Funds and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust and Vanguard STAR 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 STAR Funds are associated (or correlated) with ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of Vanguard STAR i.e., Vanguard STAR and ProShares Trust go up and down completely randomly.

Pair Corralation between Vanguard STAR and ProShares Trust

Assuming the 90 days trading horizon Vanguard STAR Funds is expected to under-perform the ProShares Trust. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard STAR Funds is 1.24 times less risky than ProShares Trust. The etf trades about -0.07 of its potential returns per unit of risk. The ProShares Trust is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  225,878  in ProShares Trust on October 6, 2024 and sell it today you would earn a total of  3,843  from holding ProShares Trust or generate 1.7% return on investment over 90 days.

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

Vanguard STAR Funds  vs.  ProShares Trust

Vanguard STAR Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard STAR Funds has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vanguard STAR is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ProShares Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, ProShares Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vanguard STAR and ProShares Trust

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

The idea behind Vanguard STAR Funds and ProShares Trust 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.