Correlation Between First Trust and ProShares
Can any of the company-specific risk be diversified away by investing in both First Trust and ProShares 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 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dow and ProShares SP Kensho, you can compare the effects of market volatilities on First Trust and ProShares 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ProShares.
Diversification Opportunities for First Trust and ProShares
0.96 | Correlation Coefficient |
Almost no diversification
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 Dow and ProShares SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP Kensho 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 Dow are associated (or correlated) with ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP Kensho has no effect on the direction of First Trust i.e., First Trust and ProShares go up and down completely randomly.
Pair Corralation between First Trust and ProShares
Considering the 90-day investment horizon First Trust Dow is expected to generate 0.73 times more return on investment than ProShares. However, First Trust Dow is 1.36 times less risky than ProShares. It trades about 0.15 of its potential returns per unit of risk. ProShares SP Kensho is currently generating about 0.07 per unit of risk. If you would invest 19,430 in First Trust Dow on September 1, 2024 and sell it today you would earn a total of 4,727 from holding First Trust Dow or generate 24.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dow vs. ProShares SP Kensho
Performance |
| Timeline |
| First Trust Dow |
| ProShares SP Kensho |
First Trust and ProShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and ProShares
The main advantage of trading using opposite First Trust and ProShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ProShares 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 will offset losses from the drop in ProShares' long position.| First Trust vs. First Trust Cloud | First Trust vs. iShares Expanded Tech Software | First Trust vs. Invesco NASDAQ Internet | First Trust vs. First Trust NASDAQ 100 Technology |
| ProShares vs. Nexalin Technology | ProShares vs. Kilroy Realty Corp | ProShares vs. Highwoods Properties | ProShares vs. Karat Packaging |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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