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 Short, 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

-0.92

Correlation Coefficient

ProShares VIX  First Trust

Pay attention - limited upside

The 3 months correlation between ProShares and First is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding ProShares VIX Short Term and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short 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 Short 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 38.55 times more volatile than First Trust Short. It trades about -0.18 of its total potential returns per unit of risk. First Trust Short is currently generating about 0.27 per unit of volatility. If you would invest  1,959  in First Trust Short on April 28, 2025 and sell it today you would earn a total of  29.00  from holding First Trust Short or generate 1.48% 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 Short

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 unfluctuating 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 Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Short are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary 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 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 Short 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..