Correlation Between First Trust and ProShares Hedge
Can any of the company-specific risk be diversified away by investing in both First Trust and ProShares Hedge 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 Hedge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and ProShares Hedge Replication, you can compare the effects of market volatilities on First Trust and ProShares Hedge 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 Hedge. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and ProShares Hedge.
Diversification Opportunities for First Trust and ProShares Hedge
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and ProShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and ProShares Hedge Replication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Hedge Repl 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 Exchange Traded are associated (or correlated) with ProShares Hedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Hedge Repl has no effect on the direction of First Trust i.e., First Trust and ProShares Hedge go up and down completely randomly.
Pair Corralation between First Trust and ProShares Hedge
Given the investment horizon of 90 days First Trust Exchange Traded is expected to generate 3.25 times more return on investment than ProShares Hedge. However, First Trust is 3.25 times more volatile than ProShares Hedge Replication. It trades about 0.15 of its potential returns per unit of risk. ProShares Hedge Replication is currently generating about 0.22 per unit of risk. If you would invest 2,278 in First Trust Exchange Traded on May 28, 2025 and sell it today you would earn a total of 172.00 from holding First Trust Exchange Traded or generate 7.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
First Trust Exchange Traded vs. ProShares Hedge Replication
Performance |
| Timeline |
| First Trust Exchange |
| ProShares Hedge Repl |
First Trust and ProShares Hedge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and ProShares Hedge
The main advantage of trading using opposite First Trust and ProShares Hedge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, ProShares Hedge 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 Hedge will offset losses from the drop in ProShares Hedge's long position.| First Trust vs. FT Vest Equity | First Trust vs. Northern Lights | First Trust vs. Dimensional International High | First Trust vs. JPMorgan Fundamental Data |
| ProShares Hedge vs. ProShares Merger ETF | ProShares Hedge vs. IQ Hedge Multi Strategy | ProShares Hedge vs. ProShares Large Cap | ProShares Hedge vs. IQ Merger Arbitrage |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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