Correlation Between VanEck Vectors and ProShares UltraShort

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

By analyzing existing cross correlation between VanEck Vectors ETF and ProShares UltraShort Dow30, you can compare the effects of market volatilities on VanEck Vectors 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 VanEck Vectors with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Vectors and ProShares UltraShort.

Diversification Opportunities for VanEck Vectors and ProShares UltraShort

-0.78

Correlation Coefficient

VanEck Vectors  ProShares UltraShort

Pay attention - limited upside

The 24 months correlation between VanEck and ProShares is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Vectors ETF and ProShares UltraShort Dow30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and VanEck Vectors 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 VanEck Vectors ETF 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 VanEck Vectors i.e., VanEck Vectors and ProShares UltraShort go up and down completely randomly.

Pair Corralation between VanEck Vectors and ProShares UltraShort

Considering the 90-day investment horizon VanEck Vectors is expected to generate 5.58 times less return on investment than ProShares UltraShort. But when comparing it to its historical volatility, VanEck Vectors ETF is 5.74 times less risky than ProShares UltraShort. It trades about 0.07 of its potential returns per unit of risk. ProShares UltraShort Dow30 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,223  in ProShares UltraShort Dow30 on February 7, 2024 and sell it today you would earn a total of  59.00  from holding ProShares UltraShort Dow30 or generate 1.83% return on investment over 90 days.

Time Period	24 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

VanEck Vectors ETF  vs.  ProShares UltraShort Dow30

VanEck Vectors ETF

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vectors ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, VanEck Vectors is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ProShares UltraShort Dow30 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ProShares UltraShort is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with VanEck Vectors and ProShares UltraShort

The main advantage of trading using opposite VanEck Vectors and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Vectors 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 VanEck Vectors ETF and ProShares UltraShort Dow30 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.