Correlation Between ProShares Ultra and First Trust
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra 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 Ultra 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 Ultra Yen and First Trust Large, you can compare the effects of market volatilities on ProShares Ultra 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 Ultra with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and First Trust.
Diversification Opportunities for ProShares Ultra and First Trust
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and First is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Yen and First Trust Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Large and ProShares Ultra 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 Ultra Yen 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 Large has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and First Trust go up and down completely randomly.
Pair Corralation between ProShares Ultra and First Trust
Considering the 90-day investment horizon ProShares Ultra is expected to generate 2.78 times less return on investment than First Trust. In addition to that, ProShares Ultra is 1.9 times more volatile than First Trust Large. It trades about 0.07 of its total potential returns per unit of risk. First Trust Large is currently generating about 0.36 per unit of volatility. If you would invest 10,466 in First Trust Large on August 30, 2024 and sell it today you would earn a total of 783.00 from holding First Trust Large or generate 7.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Ultra Yen vs. First Trust Large
Performance |
| Timeline |
| ProShares Ultra Yen |
| First Trust Large |
ProShares Ultra and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Ultra and First Trust
The main advantage of trading using opposite ProShares Ultra and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra 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 Ultra vs. ProShares Ultra Euro | ProShares Ultra vs. ProShares UltraShort Yen | ProShares Ultra vs. ProShares Ultra Telecommunications | ProShares Ultra vs. ProShares Ultra Consumer |
| First Trust vs. First Trust Large | First Trust vs. First Trust Small | First Trust vs. First Trust Mid | First Trust vs. First Trust Large |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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