Correlation Between First Trust and ProShares Supply
Can any of the company-specific risk be diversified away by investing in both First Trust and ProShares Supply 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 Supply 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 Supply Chain, you can compare the effects of market volatilities on First Trust and ProShares Supply 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 Supply. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ProShares Supply.
Diversification Opportunities for First Trust and ProShares Supply
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and ProShares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and ProShares Supply Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Supply Chain 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 Supply. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Supply Chain has no effect on the direction of First Trust i.e., First Trust and ProShares Supply go up and down completely randomly.
Pair Corralation between First Trust and ProShares Supply
Given the investment horizon of 90 days First Trust Exchange Traded is expected to generate 1.87 times more return on investment than ProShares Supply. However, First Trust is 1.87 times more volatile than ProShares Supply Chain. It trades about 0.11 of its potential returns per unit of risk. ProShares Supply Chain is currently generating about 0.18 per unit of risk. If you would invest 2,535 in First Trust Exchange Traded on August 30, 2024 and sell it today you would earn a total of 75.00 from holding First Trust Exchange Traded or generate 2.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Exchange Traded vs. ProShares Supply Chain
Performance |
| Timeline |
| First Trust Exchange |
| ProShares Supply Chain |
First Trust and ProShares Supply Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and ProShares Supply
The main advantage of trading using opposite First Trust and ProShares Supply positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ProShares Supply 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 Supply will offset losses from the drop in ProShares Supply's long position.| First Trust vs. First Trust Expanded | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust International |
| ProShares Supply vs. Materials Select Sector | ProShares Supply vs. Consumer Discretionary Select | ProShares Supply vs. Consumer Staples Select | ProShares Supply vs. Health Care Select |
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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