Correlation Between ProShares Decline and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both ProShares Decline 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 Decline 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 Decline of and Direxion Daily SP, you can compare the effects of market volatilities on ProShares Decline 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 Decline with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Decline and Direxion Daily.
Diversification Opportunities for ProShares Decline and Direxion Daily
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and Direxion is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Decline of and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and ProShares Decline 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 Decline of 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 SP has no effect on the direction of ProShares Decline i.e., ProShares Decline and Direxion Daily go up and down completely randomly.
Pair Corralation between ProShares Decline and Direxion Daily
Given the investment horizon of 90 days ProShares Decline of is expected to generate 0.28 times more return on investment than Direxion Daily. However, ProShares Decline of is 3.53 times less risky than Direxion Daily. It trades about -0.03 of its potential returns per unit of risk. Direxion Daily SP is currently generating about -0.07 per unit of risk. If you would invest 1,327 in ProShares Decline of on September 5, 2024 and sell it today you would lose (65.00) from holding ProShares Decline of or give up 4.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Decline of vs. Direxion Daily SP
Performance |
| Timeline |
| ProShares Decline |
| Direxion Daily SP |
ProShares Decline and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Decline and Direxion Daily
The main advantage of trading using opposite ProShares Decline and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Decline 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.| ProShares Decline vs. ProShares Long OnlineShort | ProShares Decline vs. ProShares Short High | ProShares Decline vs. ProShares Short Real | ProShares Decline vs. ProShares Short Financials |
| Direxion Daily vs. ProShares Ultra MSCI | Direxion Daily vs. ProShares UltraShort MSCI | Direxion Daily vs. Direxion Daily MSCI |
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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