Correlation Between Direxion Daily and ProShares Short
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and ProShares Short 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 Daily and ProShares Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Real and ProShares Short High, you can compare the effects of market volatilities on Direxion Daily and ProShares Short 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 Daily with a short position of ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and ProShares Short.
Diversification Opportunities for Direxion Daily and ProShares Short
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Direxion and ProShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Real and ProShares Short High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short High and Direxion Daily 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 Daily Real are associated (or correlated) with ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short High has no effect on the direction of Direxion Daily i.e., Direxion Daily and ProShares Short go up and down completely randomly.
Pair Corralation between Direxion Daily and ProShares Short
Considering the 90-day investment horizon Direxion Daily Real is expected to under-perform the ProShares Short. In addition to that, Direxion Daily is 8.47 times more volatile than ProShares Short High. It trades about -0.03 of its total potential returns per unit of risk. ProShares Short High is currently generating about -0.03 per unit of volatility. If you would invest 1,735 in ProShares Short High on August 30, 2024 and sell it today you would lose (107.00) from holding ProShares Short High or give up 6.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Real vs. ProShares Short High
Performance |
| Timeline |
| Direxion Daily Real |
| ProShares Short High |
Direxion Daily and ProShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and ProShares Short
The main advantage of trading using opposite Direxion Daily and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, ProShares Short 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 Short will offset losses from the drop in ProShares Short's long position.| Direxion Daily vs. Direxion Daily Real | Direxion Daily vs. Direxion Daily MSCI | Direxion Daily vs. Direxion Daily Energy | Direxion Daily vs. Direxion Daily Technology |
| ProShares Short vs. ProShares UltraShort 20 | ProShares Short vs. ProShares Short 20 | ProShares Short vs. ProShares UltraShort 7 10 |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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