Correlation Between ProShares Online and First Trust

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

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

Diversification Opportunities for ProShares Online and First Trust

0.69

Correlation Coefficient

ProShares Online  First Trust

Poor diversification

The 3 months correlation between ProShares and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Online Retail and First Trust Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Equity and ProShares Online 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 ProShares Online Retail are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Equity has no effect on the direction of ProShares Online i.e., ProShares Online and First Trust go up and down completely randomly.

Pair Corralation between ProShares Online and First Trust

Given the investment horizon of 90 days ProShares Online is expected to generate 1.7 times less return on investment than First Trust. But when comparing it to its historical volatility, ProShares Online Retail is 1.05 times less risky than First Trust. It trades about 0.06 of its potential returns per unit of risk. First Trust Equity is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,219  in First Trust Equity on October 9, 2024 and sell it today you would earn a total of  2,294  from holding First Trust Equity or generate 22.45% return on investment over 90 days.

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

ProShares Online Retail  vs.  First Trust Equity

ProShares Online Retail

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Online Retail are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

First Trust Equity

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Equity are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ProShares Online and First Trust

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

The idea behind ProShares Online Retail and First Trust Equity 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..