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 SP MidCap and First Trust IndustrialsProducer, 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

0.68

Correlation Coefficient

ProShares  First Trust

Poor diversification

The 3 months correlation between ProShares and First is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP MidCap and First Trust IndustrialsProduce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Industri 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 SP MidCap 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 Industri 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 SP MidCap is expected to generate 0.73 times more return on investment than First Trust. However, ProShares SP MidCap is 1.37 times less risky than First Trust. It trades about -0.05 of its potential returns per unit of risk. First Trust IndustrialsProducer is currently generating about -0.07 per unit of risk. If you would invest  8,515  in ProShares SP MidCap on August 24, 2025 and sell it today you would lose (225.00) from holding ProShares SP MidCap or give up 2.64% of portfolio value over 90 days.

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

ProShares SP MidCap  vs.  First Trust IndustrialsProduce

ProShares SP MidCap

Risk-Adjusted Performance

Weakest

Over the last 90 days ProShares SP MidCap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, ProShares is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

First Trust Industri

Risk-Adjusted Performance

Weakest

Over the last 90 days First Trust IndustrialsProducer has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, First Trust is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail 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 SP MidCap and First Trust IndustrialsProducer 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.