Correlation Between ProShares UltraShort and Direxion Daily

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Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Direxion Daily 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 UltraShort and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort MSCI and Direxion Daily Dow, you can compare the effects of market volatilities on ProShares UltraShort and Direxion Daily 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 UltraShort with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Direxion Daily.

Diversification Opportunities for ProShares UltraShort and Direxion Daily

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between ProShares and Direxion is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort MSCI and Direxion Daily Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Dow and ProShares UltraShort 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 UltraShort MSCI are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Dow has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Direxion Daily go up and down completely randomly.

Pair Corralation between ProShares UltraShort and Direxion Daily

Considering the 90-day investment horizon ProShares UltraShort MSCI is expected to generate 0.53 times more return on investment than Direxion Daily. However, ProShares UltraShort MSCI is 1.88 times less risky than Direxion Daily. It trades about 0.2 of its potential returns per unit of risk. Direxion Daily Dow is currently generating about -0.42 per unit of risk. If you would invest  1,542  in ProShares UltraShort MSCI on September 6, 2024 and sell it today you would earn a total of  133.00  from holding ProShares UltraShort MSCI or generate 8.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ProShares UltraShort MSCI  vs.  Direxion Daily Dow

 Performance 
       Timeline  
ProShares UltraShort MSCI 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ProShares UltraShort MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.
Direxion Daily Dow 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Direxion Daily Dow has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's fundamental drivers remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

ProShares UltraShort and Direxion Daily Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares UltraShort and Direxion Daily

The main advantage of trading using opposite ProShares UltraShort and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, Direxion Daily 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 Daily will offset losses from the drop in Direxion Daily's long position.
The idea behind ProShares UltraShort MSCI and Direxion Daily Dow 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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