Correlation Between ProShares UltraShort and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Direxion Shares 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 Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort SP500 and Direxion Shares ETF, you can compare the effects of market volatilities on ProShares UltraShort and Direxion Shares 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 Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Direxion Shares.
Diversification Opportunities for ProShares UltraShort and Direxion Shares
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ProShares and Direxion is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SP500 and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF 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 SP500 are associated (or correlated) with Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Direxion Shares go up and down completely randomly.
Pair Corralation between ProShares UltraShort and Direxion Shares
Considering the 90-day investment horizon ProShares UltraShort SP500 is expected to under-perform the Direxion Shares. In addition to that, ProShares UltraShort is 1.02 times more volatile than Direxion Shares ETF. It trades about -0.1 of its total potential returns per unit of risk. Direxion Shares ETF is currently generating about -0.09 per unit of volatility. If you would invest 2,217 in Direxion Shares ETF on September 1, 2024 and sell it today you would lose (412.00) from holding Direxion Shares ETF or give up 18.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
ProShares UltraShort SP500 vs. Direxion Shares ETF
Performance |
| Timeline |
| ProShares UltraShort |
| Direxion Shares ETF |
ProShares UltraShort and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and Direxion Shares
The main advantage of trading using opposite ProShares UltraShort and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, Direxion Shares 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 Shares will offset losses from the drop in Direxion Shares' long position.| ProShares UltraShort vs. ProShares UltraShort QQQ | ProShares UltraShort vs. ProShares UltraShort Dow30 | ProShares UltraShort vs. ProShares Ultra SP500 | ProShares UltraShort vs. ProShares Short SP500 |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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