Correlation Between ProShares UltraShort and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort 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 UltraShort 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 UltraShort Technology and Direxion Daily SP, you can compare the effects of market volatilities on ProShares UltraShort 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 UltraShort with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Direxion Daily.
Diversification Opportunities for ProShares UltraShort and Direxion Daily
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between ProShares and Direxion is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort Technolog 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 UltraShort 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 UltraShort Technology 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 UltraShort i.e., ProShares UltraShort and Direxion Daily go up and down completely randomly.
Pair Corralation between ProShares UltraShort and Direxion Daily
Considering the 90-day investment horizon ProShares UltraShort Technology is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraShort Technology is 1.87 times less risky than Direxion Daily. The etf trades about -0.08 of its potential returns per unit of risk. The Direxion Daily SP is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 14,447 in Direxion Daily SP on August 25, 2024 and sell it today you would lose (3,105) from holding Direxion Daily SP or give up 21.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraShort Technolog vs. Direxion Daily SP
Performance |
| Timeline |
| ProShares UltraShort |
| Direxion Daily SP |
ProShares UltraShort and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and Direxion Daily
The main advantage of trading using opposite ProShares UltraShort and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort 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 UltraShort vs. Direxion Daily SP | ProShares UltraShort vs. Direxion Daily Semiconductor | ProShares UltraShort vs. Direxion Daily Technology |
| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Semiconductor |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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