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 Value and ProShares SP 500, 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
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and ProShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Value and ProShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP 500 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 Value 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 500 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 Value is expected to generate 0.95 times more return on investment than ProShares. However, First Trust Value is 1.05 times less risky than ProShares. It trades about 0.03 of its potential returns per unit of risk. ProShares SP 500 is currently generating about 0.0 per unit of risk. If you would invest 4,409 in First Trust Value on November 2, 2024 and sell it today you would earn a total of 72.00 from holding First Trust Value or generate 1.63% 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 Value vs. ProShares SP 500
Performance |
| Timeline |
| First Trust Value |
| ProShares SP 500 |
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 Morningstar | First Trust vs. First Trust Rising | First Trust vs. First Trust Capital | First Trust vs. WisdomTree LargeCap Dividend |
| ProShares vs. iShares Core Dividend | ProShares vs. SPDR SP Dividend | ProShares vs. Invesco SP 500 | ProShares vs. Vanguard Dividend Appreciation |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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