Correlation Between ProShares VIX and First Trust

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

Diversification Opportunities for ProShares VIX and First Trust

-0.81

Correlation Coefficient

ProShares VIX  First Trust

Pay attention - limited upside

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 VIX Short Term and First Trust Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Alternative and ProShares VIX 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 VIX Short Term 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 Alternative has no effect on the direction of ProShares VIX i.e., ProShares VIX and First Trust go up and down completely randomly.

Pair Corralation between ProShares VIX and First Trust

Given the investment horizon of 90 days ProShares VIX Short Term is expected to under-perform the First Trust. In addition to that, ProShares VIX is 4.22 times more volatile than First Trust Alternative. It trades about -0.18 of its total potential returns per unit of risk. First Trust Alternative is currently generating about 0.21 per unit of volatility. If you would invest  2,638  in First Trust Alternative on May 1, 2025 and sell it today you would earn a total of  281.40  from holding First Trust Alternative or generate 10.67% return on investment over 90 days.

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

ProShares VIX Short Term  vs.  First Trust Alternative

ProShares VIX Short

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares VIX Short Term has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

First Trust Alternative

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Alternative are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with ProShares VIX and First Trust

The main advantage of trading using opposite ProShares VIX and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares VIX 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 VIX Short Term and First Trust Alternative 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.