Correlation Between Direxion Daily and ProShares Decline
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and ProShares Decline 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 Decline 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 Decline of, you can compare the effects of market volatilities on Direxion Daily and ProShares Decline 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 Decline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and ProShares Decline.
Diversification Opportunities for Direxion Daily and ProShares Decline
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 Decline of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Decline 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 Decline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Decline has no effect on the direction of Direxion Daily i.e., Direxion Daily and ProShares Decline go up and down completely randomly.
Pair Corralation between Direxion Daily and ProShares Decline
Given the investment horizon of 90 days Direxion Daily SP is expected to under-perform the ProShares Decline. In addition to that, Direxion Daily is 2.84 times more volatile than ProShares Decline of. It trades about -0.31 of its total potential returns per unit of risk. ProShares Decline of is currently generating about -0.27 per unit of volatility. If you would invest 1,368 in ProShares Decline of on September 5, 2024 and sell it today you would lose (106.00) from holding ProShares Decline of or give up 7.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily SP vs. ProShares Decline of
Performance |
| Timeline |
| Direxion Daily SP |
| ProShares Decline |
Direxion Daily and ProShares Decline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and ProShares Decline
The main advantage of trading using opposite Direxion Daily and ProShares Decline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, ProShares Decline 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 Decline will offset losses from the drop in ProShares Decline's long position.| Direxion Daily vs. ProShares Ultra MSCI | Direxion Daily vs. ProShares UltraShort MSCI | Direxion Daily vs. Direxion Daily MSCI |
| ProShares Decline vs. ProShares Long OnlineShort | ProShares Decline vs. ProShares Short High | ProShares Decline vs. ProShares Short Real | ProShares Decline vs. ProShares Short 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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