Correlation Between ProShares Trust and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both ProShares Trust and Direxion Shares 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 Trust and Direxion Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares Trust and Direxion Shares ETF, you can compare the effects of market volatilities on ProShares Trust and Direxion Shares 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 Trust with a short position of Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Trust and Direxion Shares.
Diversification Opportunities for ProShares Trust and Direxion Shares
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and Direxion is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF and ProShares 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 ProShares Trust are associated (or correlated) with Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of ProShares Trust i.e., ProShares Trust and Direxion Shares go up and down completely randomly.
Pair Corralation between ProShares Trust and Direxion Shares
Given the investment horizon of 90 days ProShares Trust is expected to under-perform the Direxion Shares. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Trust is 1.09 times less risky than Direxion Shares. The etf trades about -0.11 of its potential returns per unit of risk. The Direxion Shares ETF is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,982 in Direxion Shares ETF on September 2, 2024 and sell it today you would lose (1,003) from holding Direxion Shares ETF or give up 50.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Trust vs. Direxion Shares ETF
Performance |
| Timeline |
| ProShares Trust |
| Direxion Shares ETF |
ProShares Trust and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Trust and Direxion Shares
The main advantage of trading using opposite ProShares Trust and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Trust position performs unexpectedly, Direxion Shares 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 Direxion Shares will offset losses from the drop in Direxion Shares' long position.| ProShares Trust vs. AXS TSLA Bear | ProShares Trust vs. Tuttle Capital Short | ProShares Trust vs. ProShares Bitcoin Strategy | ProShares Trust vs. ProShares UltraShort Bloomberg |
| Direxion Shares vs. Direxion Shares ETF | Direxion Shares vs. Direxion Shares ETF | Direxion Shares vs. Direxion Shares ETF | Direxion Shares vs. AXS TSLA Bear |
Check out your portfolio center.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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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