Correlation Between ProShares UltraPro and First Trust
Can any of the company-specific risk be diversified away by investing in both ProShares UltraPro 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 UltraPro 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 UltraPro SP500 and First Trust SMID, you can compare the effects of market volatilities on ProShares UltraPro 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 UltraPro with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and First Trust.
Diversification Opportunities for ProShares UltraPro and First Trust
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ProShares and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and First Trust SMID in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SMID and ProShares UltraPro 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 UltraPro SP500 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 SMID has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and First Trust go up and down completely randomly.
Pair Corralation between ProShares UltraPro and First Trust
Given the investment horizon of 90 days ProShares UltraPro SP500 is expected to generate 1.7 times more return on investment than First Trust. However, ProShares UltraPro is 1.7 times more volatile than First Trust SMID. It trades about 0.17 of its potential returns per unit of risk. First Trust SMID is currently generating about 0.17 per unit of risk. If you would invest 7,694 in ProShares UltraPro SP500 on August 31, 2024 and sell it today you would earn a total of 1,845 from holding ProShares UltraPro SP500 or generate 23.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraPro SP500 vs. First Trust SMID
Performance |
| Timeline |
| ProShares UltraPro SP500 |
| First Trust SMID |
ProShares UltraPro and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraPro and First Trust
The main advantage of trading using opposite ProShares UltraPro and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraPro 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 UltraPro vs. ProShares UltraPro Dow30 | ProShares UltraPro vs. ProShares UltraPro Short | ProShares UltraPro vs. ProShares UltraPro QQQ | ProShares UltraPro vs. Direxion Daily Small |
| First Trust vs. First Trust Rising | First Trust vs. First Trust Equity | First Trust vs. First Trust Small | First Trust vs. VictoryShares Small Cap |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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