Correlation Between Direxion and ProShares Ultra
Can any of the company-specific risk be diversified away by investing in both Direxion and ProShares Ultra 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 Direxion and ProShares Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion and ProShares Ultra SP500, you can compare the effects of market volatilities on Direxion and ProShares Ultra 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 Direxion with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion and ProShares Ultra.
Diversification Opportunities for Direxion and ProShares Ultra
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Direxion and ProShares is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Direxion and ProShares Ultra SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra SP500 and Direxion 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 Direxion are associated (or correlated) with ProShares Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra SP500 has no effect on the direction of Direxion i.e., Direxion and ProShares Ultra go up and down completely randomly.
Pair Corralation between Direxion and ProShares Ultra
If you would invest 9,661 in ProShares Ultra SP500 on September 13, 2024 and sell it today you would earn a total of 293.00 from holding ProShares Ultra SP500 or generate 3.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Direxion vs. ProShares Ultra SP500
Performance |
| Timeline |
| Direxion |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| ProShares Ultra SP500 |
Direxion and ProShares Ultra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion and ProShares Ultra
The main advantage of trading using opposite Direxion and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion position performs unexpectedly, ProShares Ultra 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 ProShares Ultra will offset losses from the drop in ProShares Ultra's long position.The idea behind Direxion and ProShares Ultra SP500 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.| ProShares Ultra vs. ProShares Ultra QQQ | ProShares Ultra vs. ProShares Ultra Dow30 | ProShares Ultra vs. ProShares UltraShort SP500 | ProShares Ultra vs. ProShares Ultra Financials |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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