Correlation Between ProShares Ultra and First Trust

Can any of the company-specific risk be diversified away by investing in both ProShares Ultra 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 Ultra 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 Ultra SP500 and First Trust Cboe, you can compare the effects of market volatilities on ProShares Ultra 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 Ultra with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and First Trust.

Diversification Opportunities for ProShares Ultra and First Trust

0.83

Correlation Coefficient

ProShares Ultra  First Trust

Very poor diversification

The 3 months correlation between ProShares and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra SP500 and First Trust Cboe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Cboe and ProShares Ultra 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 Ultra SP500 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 Cboe has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and First Trust go up and down completely randomly.

Pair Corralation between ProShares Ultra and First Trust

Considering the 90-day investment horizon ProShares Ultra SP500 is expected to generate 3.8 times more return on investment than First Trust. However, ProShares Ultra is 3.8 times more volatile than First Trust Cboe. It trades about 0.2 of its potential returns per unit of risk. First Trust Cboe is currently generating about 0.25 per unit of risk. If you would invest  9,814  in ProShares Ultra SP500 on August 1, 2025 and sell it today you would earn a total of  1,796  from holding ProShares Ultra SP500 or generate 18.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

ProShares Ultra SP500  vs.  First Trust Cboe

ProShares Ultra SP500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra SP500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, ProShares Ultra displayed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Cboe

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Cboe are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ProShares Ultra and First Trust

The main advantage of trading using opposite ProShares Ultra and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra 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 Ultra SP500 and First Trust Cboe 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.