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 Oil and First Trust Brazil, 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

-0.49

Correlation Coefficient

ProShares Ultra  First Trust

Very good diversification

The 3 months correlation between ProShares and First is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Oil and First Trust Brazil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Brazil 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 Oil 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 Brazil 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 Oil is expected to generate 1.61 times more return on investment than First Trust. However, ProShares Ultra is 1.61 times more volatile than First Trust Brazil. It trades about 0.05 of its potential returns per unit of risk. First Trust Brazil is currently generating about -0.12 per unit of risk. If you would invest  3,690  in ProShares Ultra Oil on September 14, 2024 and sell it today you would earn a total of  220.00  from holding ProShares Ultra Oil or generate 5.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

ProShares Ultra Oil  vs.  First Trust Brazil

ProShares Ultra Oil

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Oil are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, ProShares Ultra may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Trust Brazil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Brazil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

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.

The idea behind ProShares Ultra Oil and First Trust Brazil pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.