Correlation Between ProShares Short and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both ProShares Short 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 Short 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 Short SmallCap600 and Direxion Daily Technology, you can compare the effects of market volatilities on ProShares Short 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 Short with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and Direxion Daily.
Diversification Opportunities for ProShares Short and Direxion Daily
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and Direxion is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short SmallCap600 and Direxion Daily Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Technology and ProShares Short 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 Short SmallCap600 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 Technology has no effect on the direction of ProShares Short i.e., ProShares Short and Direxion Daily go up and down completely randomly.
Pair Corralation between ProShares Short and Direxion Daily
Considering the 90-day investment horizon ProShares Short SmallCap600 is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Short SmallCap600 is 2.16 times less risky than Direxion Daily. The etf trades about -0.21 of its potential returns per unit of risk. The Direxion Daily Technology is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 5,060 in Direxion Daily Technology on August 31, 2024 and sell it today you would lose (153.00) from holding Direxion Daily Technology or give up 3.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Short SmallCap600 vs. Direxion Daily Technology
Performance |
| Timeline |
| ProShares Short Smal |
| Direxion Daily Technology |
ProShares Short and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Short and Direxion Daily
The main advantage of trading using opposite ProShares Short and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Short 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 Short vs. ProShares Short MidCap400 | ProShares Short vs. ProShares UltraShort SmallCap600 | ProShares Short vs. ProShares UltraShort MidCap400 | ProShares Short vs. ProShares UltraShort Health |
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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