Correlation Between Proshares Russell and Direxion
Can any of the company-specific risk be diversified away by investing in both Proshares Russell and Direxion 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 Russell and Direxion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Proshares Russell 2000 and Direxion, you can compare the effects of market volatilities on Proshares Russell and Direxion 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 Russell with a short position of Direxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proshares Russell and Direxion.
Diversification Opportunities for Proshares Russell and Direxion
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Proshares and Direxion is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Proshares Russell 2000 and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion and Proshares Russell 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 Russell 2000 are associated (or correlated) with Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of Proshares Russell i.e., Proshares Russell and Direxion go up and down completely randomly.
Pair Corralation between Proshares Russell and Direxion
Given the investment horizon of 90 days Proshares Russell 2000 is expected to generate 2.62 times more return on investment than Direxion. However, Proshares Russell is 2.62 times more volatile than Direxion. It trades about 0.06 of its potential returns per unit of risk. Direxion is currently generating about -0.01 per unit of risk. If you would invest 3,871 in Proshares Russell 2000 on September 5, 2024 and sell it today you would earn a total of 443.00 from holding Proshares Russell 2000 or generate 11.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 67.37% |
| Values | Daily Returns |
Proshares Russell 2000 vs. Direxion
Performance |
| Timeline |
| Proshares Russell 2000 |
| Direxion |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Proshares Russell and Direxion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Proshares Russell and Direxion
The main advantage of trading using opposite Proshares Russell and Direxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proshares Russell position performs unexpectedly, Direxion 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 will offset losses from the drop in Direxion's long position.| Proshares Russell vs. Global X Dow | Proshares Russell vs. AdvisorShares STAR Global | Proshares Russell vs. Global X Funds | Proshares Russell vs. FT Vest Dow |
| Direxion vs. Vanguard Consumer Staples | Direxion vs. Vanguard Financials Index | Direxion vs. Vanguard Information Technology | Direxion vs. Vanguard Consumer Discretionary |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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