Correlation Between First Trust and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust SkyBridge and ProShares UltraShort Oil, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ProShares UltraShort.
Diversification Opportunities for First Trust and ProShares UltraShort
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and ProShares is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SkyBridge and ProShares UltraShort Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort Oil and First 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 First Trust SkyBridge 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 Oil has no effect on the direction of First Trust i.e., First Trust and ProShares UltraShort go up and down completely randomly.
Pair Corralation between First Trust and ProShares UltraShort
Given the investment horizon of 90 days First Trust SkyBridge is expected to generate 2.1 times more return on investment than ProShares UltraShort. However, First Trust is 2.1 times more volatile than ProShares UltraShort Oil. It trades about 0.1 of its potential returns per unit of risk. ProShares UltraShort Oil is currently generating about -0.03 per unit of risk. If you would invest 1,262 in First Trust SkyBridge on September 1, 2024 and sell it today you would earn a total of 808.00 from holding First Trust SkyBridge or generate 64.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust SkyBridge vs. ProShares UltraShort Oil
Performance |
| Timeline |
| First Trust SkyBridge |
| ProShares UltraShort Oil |
First Trust and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and ProShares UltraShort
The main advantage of trading using opposite First Trust and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. VanEck Digital Transformation | First Trust vs. Bitwise Crypto Industry | First Trust vs. Global X Blockchain | First Trust vs. First Trust Indxx |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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