Correlation Between Vanguard Value and ProShares UltraShort

Can any of the company-specific risk be diversified away by investing in both Vanguard Value 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 Value 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 Value Index and ProShares UltraShort Utilities, you can compare the effects of market volatilities on Vanguard Value 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 Value with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Value and ProShares UltraShort.

Diversification Opportunities for Vanguard Value and ProShares UltraShort

-0.43

Correlation Coefficient

Vanguard Value  ProShares UltraShort

Very good diversification

The 3 months correlation between Vanguard and ProShares is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and ProShares UltraShort Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and Vanguard Value 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 Value 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 Value i.e., Vanguard Value and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Vanguard Value and ProShares UltraShort

Considering the 90-day investment horizon Vanguard Value Index is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Value Index is 1.68 times less risky than ProShares UltraShort. The etf trades about -0.05 of its potential returns per unit of risk. The ProShares UltraShort Utilities is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,554  in ProShares UltraShort Utilities on February 1, 2025 and sell it today you would lose (59.00) from holding ProShares UltraShort Utilities or give up 3.8% of portfolio value over 90 days.

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

Vanguard Value Index  vs.  ProShares UltraShort Utilities

Vanguard Value Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Value Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ProShares UltraShort

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares UltraShort Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, ProShares UltraShort is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard Value and ProShares UltraShort

The main advantage of trading using opposite Vanguard Value and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value 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 Value Index and ProShares UltraShort Utilities 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .