Correlation Between ProShares and Vanguard Information

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

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

Diversification Opportunities for ProShares and Vanguard Information

0.81

Correlation Coefficient

ProShares  Vanguard Information

Very poor diversification

The 3 months correlation between ProShares and Vanguard is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP Technology and Vanguard Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Information and ProShares 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 ProShares SP Technology are associated (or correlated) with Vanguard Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Information has no effect on the direction of ProShares i.e., ProShares and Vanguard Information go up and down completely randomly.

Pair Corralation between ProShares and Vanguard Information

Considering the 90-day investment horizon ProShares is expected to generate 2.76 times less return on investment than Vanguard Information. But when comparing it to its historical volatility, ProShares SP Technology is 1.19 times less risky than Vanguard Information. It trades about 0.08 of its potential returns per unit of risk. Vanguard Information Technology is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  56,502  in Vanguard Information Technology on September 12, 2024 and sell it today you would earn a total of  7,518  from holding Vanguard Information Technology or generate 13.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

ProShares SP Technology  vs.  Vanguard Information Technolog

ProShares SP Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, ProShares is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Vanguard Information

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Information Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Vanguard Information unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares and Vanguard Information

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

The idea behind ProShares SP Technology and Vanguard Information Technology 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.