Correlation Between Profunds Ultrashort and First Trust

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

By analyzing existing cross correlation between Profunds Ultrashort Nasdaq 100 and First Trust Multi Strategy, you can compare the effects of market volatilities on Profunds Ultrashort 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 Profunds Ultrashort with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Profunds Ultrashort and First Trust.

Diversification Opportunities for Profunds Ultrashort and First Trust

-0.97

Correlation Coefficient

Profunds Ultrashort  First Trust

Pay attention - limited upside

The 3 months correlation between Profunds and First is -0.97. Overlapping area represents the amount of risk that can be diversified away by holding Profunds Ultrashort Nasdaq 100 and First Trust Multi Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Multi and Profunds Ultrashort 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 Profunds Ultrashort Nasdaq 100 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 Multi has no effect on the direction of Profunds Ultrashort i.e., Profunds Ultrashort and First Trust go up and down completely randomly.

Pair Corralation between Profunds Ultrashort and First Trust

Assuming the 90 days horizon Profunds Ultrashort Nasdaq 100 is expected to under-perform the First Trust. In addition to that, Profunds Ultrashort is 12.55 times more volatile than First Trust Multi Strategy. It trades about -0.27 of its total potential returns per unit of risk. First Trust Multi Strategy is currently generating about 0.3 per unit of volatility. If you would invest  2,384  in First Trust Multi Strategy on May 3, 2025 and sell it today you would earn a total of  61.00  from holding First Trust Multi Strategy or generate 2.56% return on investment over 90 days.

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

Profunds Ultrashort Nasdaq 100  vs.  First Trust Multi Strategy

Profunds Ultrashort

Risk-Adjusted Performance

Very Weak

Over the last 90 days Profunds Ultrashort Nasdaq 100 has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

First Trust Multi

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Multi Strategy are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Profunds Ultrashort and First Trust

The main advantage of trading using opposite Profunds Ultrashort and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profunds Ultrashort 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 Profunds Ultrashort Nasdaq 100 and First Trust Multi Strategy 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .