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 Dorsey and ProShares SP MidCap, 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
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and ProShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and ProShares SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP MidCap 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 Dorsey 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 MidCap 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
Allowing for the 90-day total investment horizon First Trust Dorsey is expected to generate 1.29 times more return on investment than ProShares. However, First Trust is 1.29 times more volatile than ProShares SP MidCap. It trades about 0.08 of its potential returns per unit of risk. ProShares SP MidCap is currently generating about 0.09 per unit of risk. If you would invest 4,419 in First Trust Dorsey on August 27, 2024 and sell it today you would earn a total of 1,697 from holding First Trust Dorsey or generate 38.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dorsey vs. ProShares SP MidCap
Performance |
| Timeline |
| First Trust Dorsey |
| ProShares SP MidCap |
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 Dorsey | First Trust vs. Invesco DWA Momentum | First Trust vs. First Trust Capital | First Trust vs. First Trust Large |
| ProShares vs. Vanguard Mid Cap Index | ProShares vs. iShares Core SP | ProShares vs. SPDR SP MIDCAP | ProShares vs. First Trust Dorsey |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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