Correlation Between ProShares Trust and First Trust
Can any of the company-specific risk be diversified away by investing in both ProShares Trust and First Trust 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 Trust and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Trust and First Trust Exchange Traded, you can compare the effects of market volatilities on ProShares Trust and First Trust 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 Trust with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Trust and First Trust.
Diversification Opportunities for ProShares Trust and First Trust
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ProShares and First is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange and ProShares Trust 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 Trust are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of ProShares Trust i.e., ProShares Trust and First Trust go up and down completely randomly.
Pair Corralation between ProShares Trust and First Trust
Given the investment horizon of 90 days ProShares Trust is expected to under-perform the First Trust. In addition to that, ProShares Trust is 3.11 times more volatile than First Trust Exchange Traded. It trades about -0.03 of its total potential returns per unit of risk. First Trust Exchange Traded is currently generating about -0.01 per unit of volatility. If you would invest 6,988 in First Trust Exchange Traded on November 18, 2024 and sell it today you would lose (49.00) from holding First Trust Exchange Traded or give up 0.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Trust vs. First Trust Exchange Traded
Performance |
| Timeline |
| ProShares Trust |
| First Trust Exchange |
ProShares Trust and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Trust and First Trust
The main advantage of trading using opposite ProShares Trust and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Trust position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| ProShares Trust vs. AXS TSLA Bear | ProShares Trust vs. Tuttle Capital Short | ProShares Trust vs. ProShares Bitcoin Strategy | ProShares Trust vs. ProShares UltraShort Bloomberg |
| First Trust vs. Franklin Core Dividend | First Trust vs. WisdomTree Trust | First Trust vs. Invesco SP MidCap |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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