Correlation Between First Trust and BetaPro SP

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

By analyzing existing cross correlation between First Trust Indxx and BetaPro SP 500, you can compare the effects of market volatilities on First Trust and BetaPro SP 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 First Trust with a short position of BetaPro SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and BetaPro SP.

Diversification Opportunities for First Trust and BetaPro SP

-0.91

Correlation Coefficient

First Trust  BetaPro SP

Pay attention - limited upside

The 3 months correlation between First and BetaPro is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and BetaPro SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro SP 500 and First Trust 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 First Trust Indxx are associated (or correlated) with BetaPro SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro SP 500 has no effect on the direction of First Trust i.e., First Trust and BetaPro SP go up and down completely randomly.

Pair Corralation between First Trust and BetaPro SP

Assuming the 90 days trading horizon First Trust Indxx is expected to generate 0.38 times more return on investment than BetaPro SP. However, First Trust Indxx is 2.63 times less risky than BetaPro SP. It trades about 0.22 of its potential returns per unit of risk. BetaPro SP 500 is currently generating about -0.18 per unit of risk. If you would invest  1,098  in First Trust Indxx on April 23, 2025 and sell it today you would earn a total of  203.00  from holding First Trust Indxx or generate 18.49% return on investment over 90 days.

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

First Trust Indxx  vs.  BetaPro SP 500

First Trust Indxx

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, First Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

BetaPro SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days BetaPro SP 500 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 very healthy which may send shares a bit higher in August 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with First Trust and BetaPro SP

The main advantage of trading using opposite First Trust and BetaPro SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, BetaPro SP 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 BetaPro SP will offset losses from the drop in BetaPro SP's long position.

The idea behind First Trust Indxx and BetaPro SP 500 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.