Correlation Between First Trust and ProShares Short
Can any of the company-specific risk be diversified away by investing in both First Trust and ProShares Short 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 Short 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 Short MSCI, you can compare the effects of market volatilities on First Trust and ProShares Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ProShares Short.
Diversification Opportunities for First Trust and ProShares Short
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and ProShares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SkyBridge and ProShares Short MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short MSCI 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short MSCI has no effect on the direction of First Trust i.e., First Trust and ProShares Short go up and down completely randomly.
Pair Corralation between First Trust and ProShares Short
Given the investment horizon of 90 days First Trust SkyBridge is expected to generate 7.54 times more return on investment than ProShares Short. However, First Trust is 7.54 times more volatile than ProShares Short MSCI. It trades about 0.32 of its potential returns per unit of risk. ProShares Short MSCI is currently generating about 0.05 per unit of risk. If you would invest 1,375 in First Trust SkyBridge on September 2, 2024 and sell it today you would earn a total of 695.00 from holding First Trust SkyBridge or generate 50.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust SkyBridge vs. ProShares Short MSCI
Performance |
| Timeline |
| First Trust SkyBridge |
| ProShares Short MSCI |
First Trust and ProShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and ProShares Short
The main advantage of trading using opposite First Trust and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ProShares Short 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 Short will offset losses from the drop in ProShares Short'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 |
| ProShares Short vs. ProShares Short MSCI | ProShares Short vs. ProShares UltraShort MSCI | ProShares Short vs. ProShares UltraShort MSCI | ProShares Short vs. ProShares Short MidCap400 |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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