Correlation Between ProShares and First Trust

Can any of the company-specific risk be diversified away by investing in both ProShares 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 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 DJ Brookfield and First Trust Global, you can compare the effects of market volatilities on ProShares 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 with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and First Trust.

Diversification Opportunities for ProShares and First Trust

0.19

Correlation Coefficient

ProShares  First Trust

Average diversification

The 3 months correlation between ProShares and First is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding ProShares DJ Brookfield and First Trust Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Global and ProShares 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 DJ Brookfield 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 Global has no effect on the direction of ProShares i.e., ProShares and First Trust go up and down completely randomly.

Pair Corralation between ProShares and First Trust

Given the investment horizon of 90 days ProShares DJ Brookfield is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, ProShares DJ Brookfield is 1.15 times less risky than First Trust. The etf trades about -0.25 of its potential returns per unit of risk. The First Trust Global is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  1,574  in First Trust Global on October 6, 2024 and sell it today you would lose (54.00) from holding First Trust Global or give up 3.43% of portfolio value over 90 days.

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

ProShares DJ Brookfield  vs.  First Trust Global

ProShares DJ Brookfield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares DJ Brookfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, ProShares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Trust Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with ProShares and First Trust

The main advantage of trading using opposite ProShares and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares 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 DJ Brookfield and First Trust Global 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.