Correlation Between First Trust and ProShares Short
Can any of the company-specific risk be diversified away by investing in both First Trust and ProShares Short 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 Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Japan and ProShares Short Russell2000, you can compare the effects of market volatilities on First Trust and ProShares Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ProShares Short.
Diversification Opportunities for First Trust and ProShares Short
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and ProShares is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Japan and ProShares Short Russell2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short Russ 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 Japan are associated (or correlated) with ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short Russ has no effect on the direction of First Trust i.e., First Trust and ProShares Short go up and down completely randomly.
Pair Corralation between First Trust and ProShares Short
Considering the 90-day investment horizon First Trust Japan is expected to under-perform the ProShares Short. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Japan is 1.15 times less risky than ProShares Short. The etf trades about -0.23 of its potential returns per unit of risk. The ProShares Short Russell2000 is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 2,027 in ProShares Short Russell2000 on January 21, 2024 and sell it today you would earn a total of 166.00 from holding ProShares Short Russell2000 or generate 8.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
First Trust Japan vs. ProShares Short Russell2000
Performance |
Timeline |
First Trust Japan |
ProShares Short Russ |
First Trust and ProShares Short Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Trust and ProShares Short
The main advantage of trading using opposite First Trust and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ProShares Short 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 Short will offset losses from the drop in ProShares Short's long position.First Trust vs. iShares MSCI South | First Trust vs. iShares MSCI Hong | First Trust vs. iShares MSCI Taiwan | First Trust vs. iShares MSCI Germany |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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