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 Exchange Traded and ProShares Short SP500, 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
-0.96 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and ProShares is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and ProShares Short SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short SP500 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 Exchange Traded 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 SP500 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 Exchange Traded is expected to generate 0.42 times more return on investment than ProShares Short. However, First Trust Exchange Traded is 2.41 times less risky than ProShares Short. It trades about 0.14 of its potential returns per unit of risk. ProShares Short SP500 is currently generating about -0.07 per unit of risk. If you would invest 3,553 in First Trust Exchange Traded on August 25, 2024 and sell it today you would earn a total of 328.00 from holding First Trust Exchange Traded or generate 9.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Exchange Traded vs. ProShares Short SP500
Performance |
| Timeline |
| First Trust Exchange |
| ProShares Short SP500 |
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. First Trust Cboe | First Trust vs. FT Cboe Vest | First Trust vs. Innovator SP 500 | First Trust vs. FT Cboe Vest |
| ProShares Short vs. ProShares Short QQQ | ProShares Short vs. ProShares Short Dow30 | ProShares Short vs. ProShares UltraShort SP500 | ProShares Short vs. ProShares Short Russell2000 |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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