Correlation Between ProShares Supply and First Trust
Can any of the company-specific risk be diversified away by investing in both ProShares Supply and First Trust 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 ProShares Supply and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Supply Chain and First Trust Nasdaq, you can compare the effects of market volatilities on ProShares Supply and First Trust 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 ProShares Supply with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Supply and First Trust.
Diversification Opportunities for ProShares Supply and First Trust
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and First is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Supply Chain and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and ProShares Supply 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 ProShares Supply Chain are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Nasdaq has no effect on the direction of ProShares Supply i.e., ProShares Supply and First Trust go up and down completely randomly.
Pair Corralation between ProShares Supply and First Trust
Given the investment horizon of 90 days ProShares Supply is expected to generate 4.1 times less return on investment than First Trust. But when comparing it to its historical volatility, ProShares Supply Chain is 1.49 times less risky than First Trust. It trades about 0.04 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,016 in First Trust Nasdaq on September 3, 2024 and sell it today you would earn a total of 650.00 from holding First Trust Nasdaq or generate 21.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Supply Chain vs. First Trust Nasdaq
Performance |
| Timeline |
| ProShares Supply Chain |
| First Trust Nasdaq |
ProShares Supply and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Supply and First Trust
The main advantage of trading using opposite ProShares Supply and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Supply position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| ProShares Supply vs. Industrial Select Sector | ProShares Supply vs. Driven Brands Holdings | ProShares Supply vs. iShares Aerospace Defense | ProShares Supply vs. Vanguard Industrials Index |
| First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq | First Trust vs. First Trust Nasdaq |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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