Correlation Between Vanguard FTSE and ProShares Inflation

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

By analyzing existing cross correlation between Vanguard FTSE Developed and ProShares Inflation Expectations, you can compare the effects of market volatilities on Vanguard FTSE and ProShares Inflation 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 Inflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and ProShares Inflation.

Diversification Opportunities for Vanguard FTSE and ProShares Inflation

-0.51

Correlation Coefficient

Vanguard FTSE  ProShares Inflation

Excellent diversification

The 3 months correlation between Vanguard and ProShares is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and ProShares Inflation Expectatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Inflation 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 Developed are associated (or correlated) with ProShares Inflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Inflation has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and ProShares Inflation go up and down completely randomly.

Pair Corralation between Vanguard FTSE and ProShares Inflation

Considering the 90-day investment horizon Vanguard FTSE Developed is expected to under-perform the ProShares Inflation. In addition to that, Vanguard FTSE is 1.62 times more volatile than ProShares Inflation Expectations. It trades about -0.04 of its total potential returns per unit of risk. ProShares Inflation Expectations is currently generating about 0.1 per unit of volatility. If you would invest  3,171  in ProShares Inflation Expectations on September 2, 2024 and sell it today you would earn a total of  103.00  from holding ProShares Inflation Expectations or generate 3.25% 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 Developed  vs.  ProShares Inflation Expectatio

Vanguard FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ProShares Inflation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Inflation Expectations are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ProShares Inflation is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard FTSE and ProShares Inflation

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

The idea behind Vanguard FTSE Developed and ProShares Inflation Expectations 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.