Correlation Between ProShares UltraShort and First Trust
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort 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 UltraShort 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 UltraShort Consumer and First Trust Nasdaq, you can compare the effects of market volatilities on ProShares UltraShort 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 UltraShort with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and First Trust.
Diversification Opportunities for ProShares UltraShort and First Trust
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and First is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Consumer 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 UltraShort 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 UltraShort Consumer 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 UltraShort i.e., ProShares UltraShort and First Trust go up and down completely randomly.
Pair Corralation between ProShares UltraShort and First Trust
Considering the 90-day investment horizon ProShares UltraShort Consumer is expected to generate 1.64 times more return on investment than First Trust. However, ProShares UltraShort is 1.64 times more volatile than First Trust Nasdaq. It trades about 0.13 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about -0.19 per unit of risk. If you would invest 1,153 in ProShares UltraShort Consumer on September 24, 2024 and sell it today you would earn a total of 111.00 from holding ProShares UltraShort Consumer or generate 9.63% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
ProShares UltraShort Consumer vs. First Trust Nasdaq
Performance |
Timeline |
ProShares UltraShort |
First Trust Nasdaq |
ProShares UltraShort and First Trust Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ProShares UltraShort and First Trust
The main advantage of trading using opposite ProShares UltraShort and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort 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.ProShares UltraShort vs. MicroSectors FANG Index | ProShares UltraShort vs. Direxion Daily Semiconductor | ProShares UltraShort vs. Direxion Daily Technology |
First Trust vs. First Trust Consumer | First Trust vs. First Trust Health | First Trust vs. First Trust Utilities | First Trust vs. First Trust IndustrialsProducer |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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