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 Multi Asset and ProShares UltraShort Silver, 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

-0.77

Correlation Coefficient

First Trust  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between First and ProShares is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Multi Asset and ProShares UltraShort Silver 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 Multi Asset 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 Multi Asset is expected to generate 0.17 times more return on investment than ProShares UltraShort. However, First Trust Multi Asset is 5.77 times less risky than ProShares UltraShort. It trades about 0.1 of its potential returns per unit of risk. ProShares UltraShort Silver is currently generating about -0.2 per unit of risk. If you would invest  1,580  in First Trust Multi Asset on December 29, 2024 and sell it today you would earn a total of  51.00  from holding First Trust Multi Asset or generate 3.23% return on investment over 90 days.

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

First Trust Multi Asset  vs.  ProShares UltraShort Silver

First Trust Multi

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Multi Asset are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, First Trust is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

ProShares UltraShort

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares UltraShort Silver has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Etf's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

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.

The idea behind First Trust Multi Asset and ProShares UltraShort Silver 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.