Correlation Between First Trust and ProShares High

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

By analyzing existing cross correlation between First Trust TCW and ProShares High YieldInterest, you can compare the effects of market volatilities on First Trust and ProShares High 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 High. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ProShares High.

Diversification Opportunities for First Trust and ProShares High

-0.48

Correlation Coefficient

First Trust  ProShares High

Very good diversification

The 3 months correlation between First and ProShares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding First Trust TCW and ProShares High YieldInterest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares High Yield 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 TCW are associated (or correlated) with ProShares High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares High Yield has no effect on the direction of First Trust i.e., First Trust and ProShares High go up and down completely randomly.

Pair Corralation between First Trust and ProShares High

Given the investment horizon of 90 days First Trust is expected to generate 2.02 times less return on investment than ProShares High. But when comparing it to its historical volatility, First Trust TCW is 1.58 times less risky than ProShares High. It trades about 0.09 of its potential returns per unit of risk. ProShares High YieldInterest is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,171  in ProShares High YieldInterest on September 19, 2024 and sell it today you would earn a total of  1,398  from holding ProShares High YieldInterest or generate 27.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

First Trust TCW  vs.  ProShares High YieldInterest

First Trust TCW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust TCW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

ProShares High Yield

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares High YieldInterest are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, ProShares High is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with First Trust and ProShares High

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

The idea behind First Trust TCW and ProShares High YieldInterest 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.