Correlation Between First Trust and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both First Trust and ProShares UltraShort 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 First Trust and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Nasdaq and ProShares UltraShort Consumer, you can compare the effects of market volatilities on First Trust and ProShares UltraShort 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 First Trust with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ProShares UltraShort.
Diversification Opportunities for First Trust and ProShares UltraShort
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and ProShares is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and ProShares UltraShort Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort and First Trust 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 First Trust Nasdaq are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of First Trust i.e., First Trust and ProShares UltraShort go up and down completely randomly.
Pair Corralation between First Trust and ProShares UltraShort
Given the investment horizon of 90 days First Trust Nasdaq is expected to under-perform the ProShares UltraShort. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Nasdaq is 1.64 times less risky than ProShares UltraShort. The etf trades about -0.19 of its potential returns per unit of risk. The ProShares UltraShort Consumer is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,153 in ProShares UltraShort Consumer on September 24, 2024 and sell it today you would earn a total of 111.00 from holding ProShares UltraShort Consumer or generate 9.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
First Trust Nasdaq vs. ProShares UltraShort Consumer
Performance |
Timeline |
First Trust Nasdaq |
ProShares UltraShort |
First Trust and ProShares UltraShort Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and ProShares UltraShort
The main advantage of trading using opposite First Trust and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ProShares UltraShort 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 ProShares UltraShort will offset losses from the drop in ProShares UltraShort's long position.First Trust vs. First Trust Consumer | First Trust vs. First Trust Health | First Trust vs. First Trust Utilities | First Trust vs. First Trust IndustrialsProducer |
ProShares UltraShort vs. MicroSectors FANG Index | ProShares UltraShort vs. Direxion Daily Semiconductor | ProShares UltraShort vs. Direxion Daily Technology |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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