Correlation Between ProShares Ultra and First Trust
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra 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 Ultra 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 Ultra Oil and First Trust Technology, you can compare the effects of market volatilities on ProShares Ultra 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 Ultra with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and First Trust.
Diversification Opportunities for ProShares Ultra and First Trust
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Oil and First Trust Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Technology and ProShares Ultra 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 Ultra Oil 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 Technology has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and First Trust go up and down completely randomly.
Pair Corralation between ProShares Ultra and First Trust
Considering the 90-day investment horizon ProShares Ultra Oil is expected to generate 1.59 times more return on investment than First Trust. However, ProShares Ultra is 1.59 times more volatile than First Trust Technology. It trades about 0.33 of its potential returns per unit of risk. First Trust Technology is currently generating about 0.3 per unit of risk. If you would invest 3,988 in ProShares Ultra Oil on August 25, 2024 and sell it today you would earn a total of 659.00 from holding ProShares Ultra Oil or generate 16.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Ultra Oil vs. First Trust Technology
Performance |
| Timeline |
| ProShares Ultra Oil |
| First Trust Technology |
ProShares Ultra and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Ultra and First Trust
The main advantage of trading using opposite ProShares Ultra and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra 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 Ultra vs. ProShares UltraShort Oil | ProShares Ultra vs. ProShares Ultra Basic | ProShares Ultra vs. ProShares Ultra Financials | ProShares Ultra vs. ProShares Ultra Real |
| First Trust vs. First Trust Financials | First Trust vs. First Trust IndustrialsProducer | First Trust vs. First Trust Health | First Trust vs. First Trust Consumer |
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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