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 Consumer 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

0.42

Correlation Coefficient

First Trust  ProShares Ultra

Very weak diversification

The 3 months correlation between First and ProShares is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Consumer 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 Consumer 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

Considering the 90-day investment horizon First Trust is expected to generate 3.42 times less return on investment than ProShares Ultra. But when comparing it to its historical volatility, First Trust Consumer is 1.95 times less risky than ProShares Ultra. It trades about 0.02 of its potential returns per unit of risk. ProShares Ultra Consumer is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,524  in ProShares Ultra Consumer on September 20, 2024 and sell it today you would earn a total of  345.00  from holding ProShares Ultra Consumer or generate 22.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

First Trust Consumer  vs.  ProShares Ultra Consumer

First Trust Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

ProShares Ultra Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

The idea behind First Trust Consumer and ProShares Ultra Consumer 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.