Correlation Between BetaPro Equal and First Trust

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

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

Diversification Opportunities for BetaPro Equal and First Trust

0.91

Correlation Coefficient

BetaPro Equal  First Trust

Almost no diversification

The 3 months correlation between BetaPro and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding BetaPro Equal Weight 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 BetaPro Equal 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 BetaPro Equal Weight 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 BetaPro Equal i.e., BetaPro Equal and First Trust go up and down completely randomly.

Pair Corralation between BetaPro Equal and First Trust

Assuming the 90 days trading horizon BetaPro Equal Weight is expected to generate 0.76 times more return on investment than First Trust. However, BetaPro Equal Weight is 1.32 times less risky than First Trust. It trades about 0.41 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.24 per unit of risk. If you would invest  2,460  in BetaPro Equal Weight on April 24, 2025 and sell it today you would earn a total of  1,119  from holding BetaPro Equal Weight or generate 45.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

BetaPro Equal Weight  vs.  First Trust Nasdaq

BetaPro Equal Weight

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in BetaPro Equal Weight are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BetaPro Equal displayed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Nasdaq

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Nasdaq are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, First Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BetaPro Equal and First Trust

The main advantage of trading using opposite BetaPro Equal and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BetaPro Equal 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 BetaPro Equal Weight 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.