Correlation Between First Trust and ProShares Online

Can any of the company-specific risk be diversified away by investing in both First Trust and ProShares Online 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 Online into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Trust Consumer and ProShares Online Retail, you can compare the effects of market volatilities on First Trust and ProShares Online 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 Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ProShares Online.

Diversification Opportunities for First Trust and ProShares Online

0.41

Correlation Coefficient

First Trust  ProShares Online

Very weak diversification

The 3 months correlation between First and ProShares is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Consumer and ProShares Online Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Online Retail 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 Consumer are associated (or correlated) with ProShares Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Online Retail has no effect on the direction of First Trust i.e., First Trust and ProShares Online go up and down completely randomly.

Pair Corralation between First Trust and ProShares Online

Considering the 90-day investment horizon First Trust Consumer is expected to generate 0.62 times more return on investment than ProShares Online. However, First Trust Consumer is 1.61 times less risky than ProShares Online. It trades about -0.17 of its potential returns per unit of risk. ProShares Online Retail is currently generating about -0.22 per unit of risk. If you would invest  6,583  in First Trust Consumer on December 4, 2024 and sell it today you would lose (237.00) from holding First Trust Consumer or give up 3.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

First Trust Consumer  vs.  ProShares Online Retail

First Trust Consumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

ProShares Online Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Online Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, ProShares Online is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Trust and ProShares Online

The main advantage of trading using opposite First Trust and ProShares Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ProShares Online 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 Online will offset losses from the drop in ProShares Online's long position.

The idea behind First Trust Consumer and ProShares Online Retail 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.