Correlation Between Direxion Daily and ProShares Ultra
Can any of the company-specific risk be diversified away by investing in both Direxion Daily 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 Daily 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 Daily SP and ProShares Ultra SmallCap600, you can compare the effects of market volatilities on Direxion Daily 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 Daily with a short position of ProShares Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and ProShares Ultra.
Diversification Opportunities for Direxion Daily and ProShares Ultra
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and ProShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and ProShares Ultra SmallCap600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra Smal 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 SP 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 Smal has no effect on the direction of Direxion Daily i.e., Direxion Daily and ProShares Ultra go up and down completely randomly.
Pair Corralation between Direxion Daily and ProShares Ultra
Given the investment horizon of 90 days Direxion Daily SP is expected to generate 0.93 times more return on investment than ProShares Ultra. However, Direxion Daily SP is 1.08 times less risky than ProShares Ultra. It trades about 0.32 of its potential returns per unit of risk. ProShares Ultra SmallCap600 is currently generating about 0.29 per unit of risk. If you would invest 2,756 in Direxion Daily SP on September 1, 2024 and sell it today you would earn a total of 623.00 from holding Direxion Daily SP or generate 22.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily SP vs. ProShares Ultra SmallCap600
Performance |
| Timeline |
| Direxion Daily SP |
| ProShares Ultra Smal |
Direxion Daily and ProShares Ultra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and ProShares Ultra
The main advantage of trading using opposite Direxion Daily and ProShares Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily 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.| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Energy | Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Junior |
| ProShares Ultra vs. ProShares Ultra MidCap400 | ProShares Ultra vs. ProShares Ultra Industrials | ProShares Ultra vs. ProShares Ultra Consumer | ProShares Ultra vs. ProShares Ultra Consumer |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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