Correlation Between Direxion Daily and ProShares Short
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and ProShares Short 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 Direxion Daily and ProShares Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily SP and ProShares Short SmallCap600, you can compare the effects of market volatilities on Direxion Daily and ProShares Short 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 Direxion Daily with a short position of ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and ProShares Short.
Diversification Opportunities for Direxion Daily and ProShares Short
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direxion and ProShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and ProShares Short SmallCap600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short Smal and Direxion Daily 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 Direxion Daily SP are associated (or correlated) with ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short Smal has no effect on the direction of Direxion Daily i.e., Direxion Daily and ProShares Short go up and down completely randomly.
Pair Corralation between Direxion Daily and ProShares Short
Given the investment horizon of 90 days Direxion Daily SP is expected to under-perform the ProShares Short. But the etf apears to be less risky and, when comparing its historical volatility, Direxion Daily SP is 1.56 times less risky than ProShares Short. The etf trades about -0.06 of its potential returns per unit of risk. The ProShares Short SmallCap600 is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,648 in ProShares Short SmallCap600 on August 26, 2024 and sell it today you would lose (271.00) from holding ProShares Short SmallCap600 or give up 16.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily SP vs. ProShares Short SmallCap600
Performance |
| Timeline |
| Direxion Daily SP |
| ProShares Short Smal |
Direxion Daily and ProShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and ProShares Short
The main advantage of trading using opposite Direxion Daily and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, ProShares Short 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 ProShares Short will offset losses from the drop in ProShares Short's long position.| Direxion Daily vs. ProShares Short QQQ | Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. ProShares Short Russell2000 | Direxion Daily vs. ProShares Short SP500 |
| 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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