Correlation Between ProShares Ultra and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra 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 Ultra 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 Ultra QQQ and Direxion Daily Select, you can compare the effects of market volatilities on ProShares Ultra 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 Ultra with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Direxion Daily.
Diversification Opportunities for ProShares Ultra and Direxion Daily
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ProShares and Direxion is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra QQQ and Direxion Daily Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Select and ProShares Ultra 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 Ultra QQQ 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 Select has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Direxion Daily go up and down completely randomly.
Pair Corralation between ProShares Ultra and Direxion Daily
Considering the 90-day investment horizon ProShares Ultra QQQ is expected to generate 0.74 times more return on investment than Direxion Daily. However, ProShares Ultra QQQ is 1.35 times less risky than Direxion Daily. It trades about -0.29 of its potential returns per unit of risk. Direxion Daily Select is currently generating about -0.38 per unit of risk. If you would invest 11,479 in ProShares Ultra QQQ on December 10, 2024 and sell it today you would lose (1,643) from holding ProShares Ultra QQQ or give up 14.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Ultra QQQ vs. Direxion Daily Select
Performance |
| Timeline |
| ProShares Ultra QQQ |
| Direxion Daily Select |
ProShares Ultra and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Ultra and Direxion Daily
The main advantage of trading using opposite ProShares Ultra and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra 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 Ultra vs. ProShares Ultra SP500 | ProShares Ultra vs. ProShares UltraShort QQQ | ProShares Ultra vs. ProShares Ultra Dow30 | ProShares Ultra vs. ProShares Ultra Russell2000 |
| Direxion Daily vs. Direxion Daily Cloud | Direxion Daily vs. Direxion Daily Travel | Direxion Daily vs. Direxion Daily Dow | Direxion Daily vs. Direxion Daily Cnsmr |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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