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 NASDAQ, 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

0.57

Correlation Coefficient

ProShares Online  First Trust

Very weak diversification

The 3 months correlation between ProShares and First is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Online Retail and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ 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 NASDAQ 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 Retail is expected to generate 0.77 times more return on investment than First Trust. However, ProShares Online Retail is 1.3 times less risky than First Trust. It trades about 0.06 of its potential returns per unit of risk. First Trust NASDAQ is currently generating about -0.01 per unit of risk. If you would invest  2,980  in ProShares Online Retail on September 25, 2024 and sell it today you would earn a total of  1,606  from holding ProShares Online Retail or generate 53.89% return on investment over 90 days.

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

ProShares Online Retail  vs.  First Trust NASDAQ

ProShares Online Retail

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Online Retail are ranked lower than 5 (%) 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 recent stock price disarray, may contribute to short-term losses for the investors.

First Trust NASDAQ

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, First Trust is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 NASDAQ 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.