Correlation Between First Trust and ProShares MSCI
Can any of the company-specific risk be diversified away by investing in both First Trust and ProShares MSCI 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 MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Emerging and ProShares MSCI Emerging, you can compare the effects of market volatilities on First Trust and ProShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ProShares MSCI.
Diversification Opportunities for First Trust and ProShares MSCI
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and ProShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Emerging and ProShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares MSCI Emerging 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 Emerging are associated (or correlated) with ProShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares MSCI Emerging has no effect on the direction of First Trust i.e., First Trust and ProShares MSCI go up and down completely randomly.
Pair Corralation between First Trust and ProShares MSCI
Considering the 90-day investment horizon First Trust Emerging is expected to generate 0.9 times more return on investment than ProShares MSCI. However, First Trust Emerging is 1.11 times less risky than ProShares MSCI. It trades about -0.03 of its potential returns per unit of risk. ProShares MSCI Emerging is currently generating about -0.08 per unit of risk. If you would invest 2,266 in First Trust Emerging on August 31, 2024 and sell it today you would lose (18.00) from holding First Trust Emerging or give up 0.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Emerging vs. ProShares MSCI Emerging
Performance |
| Timeline |
| First Trust Emerging |
| ProShares MSCI Emerging |
First Trust and ProShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and ProShares MSCI
The main advantage of trading using opposite First Trust and ProShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ProShares MSCI 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 MSCI will offset losses from the drop in ProShares MSCI's long position.| First Trust vs. First Trust Developed | First Trust vs. First Trust Emerging | First Trust vs. First Trust Europe | First Trust vs. First Trust Large |
| ProShares MSCI vs. Xtrackers MSCI Emerging | ProShares MSCI vs. FlexShares Morningstar Emerging | ProShares MSCI vs. First Trust Emerging |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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