Correlation Between First Trust and ProShares Smart

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

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

Diversification Opportunities for First Trust and ProShares Smart

0.98

Correlation Coefficient

First Trust  ProShares Smart

Almost no diversification

The 3 months correlation between First and ProShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Materials and ProShares Smart Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Smart Materials 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 Materials are associated (or correlated) with ProShares Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Smart Materials has no effect on the direction of First Trust i.e., First Trust and ProShares Smart go up and down completely randomly.

Pair Corralation between First Trust and ProShares Smart

Considering the 90-day investment horizon First Trust is expected to generate 1.21 times less return on investment than ProShares Smart. But when comparing it to its historical volatility, First Trust Materials is 1.0 times less risky than ProShares Smart. It trades about 0.11 of its potential returns per unit of risk. ProShares Smart Materials is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,815  in ProShares Smart Materials on May 2, 2025 and sell it today you would earn a total of  264.00  from holding ProShares Smart Materials or generate 9.38% return on investment over 90 days.

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

First Trust Materials  vs.  ProShares Smart Materials

First Trust Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Materials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in August 2025.

ProShares Smart Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Smart Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ProShares Smart may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with First Trust and ProShares Smart

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

The idea behind First Trust Materials and ProShares Smart Materials 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.