Correlation Between Vanguard California and ProShares
Can any of the company-specific risk be diversified away by investing in both Vanguard California and ProShares 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 California and ProShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard California Intermediate Term and ProShares K 1 Free, you can compare the effects of market volatilities on Vanguard California and ProShares 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 California with a short position of ProShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard California and ProShares.
Diversification Opportunities for Vanguard California and ProShares
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vanguard and ProShares is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard California Intermedia and ProShares K 1 Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares K 1 and Vanguard California 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 California Intermediate Term are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares K 1 has no effect on the direction of Vanguard California i.e., Vanguard California and ProShares go up and down completely randomly.
Pair Corralation between Vanguard California and ProShares
Assuming the 90 days horizon Vanguard California Intermediate Term is expected to under-perform the ProShares. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard California Intermediate Term is 4.48 times less risky than ProShares. The mutual fund trades about -0.23 of its potential returns per unit of risk. The ProShares K 1 Free is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 4,746 in ProShares K 1 Free on January 16, 2024 and sell it today you would earn a total of 213.00 from holding ProShares K 1 Free or generate 4.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard California Intermedia vs. ProShares K 1 Free
Performance |
| Timeline |
| Vanguard California |
| ProShares K 1 |
Vanguard California and ProShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard California and ProShares
The main advantage of trading using opposite Vanguard California and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard California position performs unexpectedly, ProShares 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 will offset losses from the drop in ProShares' long position.The idea behind Vanguard California Intermediate Term and ProShares K 1 Free 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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