Correlation Between ProShares UltraShort and First Trust
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort 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 UltraShort 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 UltraShort 20 and First Trust RiverFront, you can compare the effects of market volatilities on ProShares UltraShort 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 UltraShort with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and First Trust.
Diversification Opportunities for ProShares UltraShort and First Trust
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and First is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort 20 and First Trust RiverFront in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust RiverFront and ProShares UltraShort 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 UltraShort 20 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 RiverFront has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and First Trust go up and down completely randomly.
Pair Corralation between ProShares UltraShort and First Trust
Considering the 90-day investment horizon ProShares UltraShort 20 is expected to generate 2.19 times more return on investment than First Trust. However, ProShares UltraShort is 2.19 times more volatile than First Trust RiverFront. It trades about -0.04 of its potential returns per unit of risk. First Trust RiverFront is currently generating about -0.24 per unit of risk. If you would invest 3,401 in ProShares UltraShort 20 on August 28, 2024 and sell it today you would lose (83.00) from holding ProShares UltraShort 20 or give up 2.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort 20 vs. First Trust RiverFront
Performance |
| Timeline |
| ProShares UltraShort |
| First Trust RiverFront |
ProShares UltraShort and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and First Trust
The main advantage of trading using opposite ProShares UltraShort and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort 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 UltraShort vs. ProShares UltraShort 7 10 | ProShares UltraShort vs. ProShares UltraShort SP500 | ProShares UltraShort vs. iShares 20 Year | ProShares UltraShort vs. Direxion Daily 20 |
| First Trust vs. WisdomTree International Hedged | First Trust vs. WisdomTree Emerging Markets | First Trust vs. WisdomTree Dynamic Currency |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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