Correlation Between First Trust and ProShares Ultra
Can any of the company-specific risk be diversified away by investing in both First Trust and ProShares Ultra 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 Ultra 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 Ultra Consumer, you can compare the effects of market volatilities on First Trust and ProShares Ultra 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 Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ProShares Ultra.
Diversification Opportunities for First Trust and ProShares Ultra
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and ProShares is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Nasdaq and ProShares Ultra Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Consumer 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 Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra Consumer has no effect on the direction of First Trust i.e., First Trust and ProShares Ultra go up and down completely randomly.
Pair Corralation between First Trust and ProShares Ultra
Given the investment horizon of 90 days First Trust Nasdaq is expected to generate 0.63 times more return on investment than ProShares Ultra. However, First Trust Nasdaq is 1.58 times less risky than ProShares Ultra. It trades about 0.41 of its potential returns per unit of risk. ProShares Ultra Consumer is currently generating about 0.19 per unit of risk. If you would invest 2,191 in First Trust Nasdaq on December 10, 2024 and sell it today you would earn a total of 211.00 from holding First Trust Nasdaq or generate 9.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
First Trust Nasdaq vs. ProShares Ultra Consumer
Performance |
Timeline |
First Trust Nasdaq |
ProShares Ultra Consumer |
First Trust and ProShares Ultra Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and ProShares Ultra
The main advantage of trading using opposite First Trust and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ProShares Ultra 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 Ultra will offset losses from the drop in ProShares Ultra's long position.First Trust vs. First Trust Consumer | First Trust vs. Fidelity MSCI Consumer | First Trust vs. iShares Consumer Staples | First Trust vs. iShares Global Consumer |
ProShares Ultra vs. ProShares Ultra Consumer | ProShares Ultra vs. ProShares Ultra Industrials | ProShares Ultra vs. ProShares Ultra Utilities | ProShares Ultra vs. ProShares Ultra Health |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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