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 Semiconductors and First Trust NASDAQ, 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

0.81

Correlation Coefficient

ProShares Ultra  First Trust

Very poor diversification

The 3 months correlation between ProShares and First is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Semiconductors and First Trust NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust NASDAQ 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 Semiconductors 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 NASDAQ 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 Semiconductors is expected to generate 3.11 times more return on investment than First Trust. However, ProShares Ultra is 3.11 times more volatile than First Trust NASDAQ. It trades about 0.38 of its potential returns per unit of risk. First Trust NASDAQ is currently generating about 0.11 per unit of risk. If you would invest  4,148  in ProShares Ultra Semiconductors on May 3, 2025 and sell it today you would earn a total of  4,428  from holding ProShares Ultra Semiconductors or generate 106.75% return on investment over 90 days.

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

ProShares Ultra Semiconductors  vs.  First Trust NASDAQ

ProShares Ultra Semi

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Semiconductors are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, ProShares Ultra exhibited solid returns over the last few months and may actually be approaching a breakup point.

First Trust NASDAQ

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental drivers, First Trust may actually be approaching a critical reversion point that can send shares even higher in September 2025.

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 Semiconductors and First Trust NASDAQ 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.