Correlation Between ProShares UltraPro and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both ProShares UltraPro 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 UltraPro 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 UltraPro Short and Direxion Daily Energy, you can compare the effects of market volatilities on ProShares UltraPro 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 UltraPro with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and Direxion Daily.
Diversification Opportunities for ProShares UltraPro and Direxion Daily
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and Direxion is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro Short and Direxion Daily Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Energy and ProShares UltraPro 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 UltraPro Short 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 Energy has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and Direxion Daily go up and down completely randomly.
Pair Corralation between ProShares UltraPro and Direxion Daily
Given the investment horizon of 90 days ProShares UltraPro Short is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, ProShares UltraPro Short is 1.02 times less risky than Direxion Daily. The etf trades about -0.1 of its potential returns per unit of risk. The Direxion Daily Energy is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 2,908 in Direxion Daily Energy on August 31, 2024 and sell it today you would lose (826.00) from holding Direxion Daily Energy or give up 28.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraPro Short vs. Direxion Daily Energy
Performance |
| Timeline |
| ProShares UltraPro Short |
| Direxion Daily Energy |
ProShares UltraPro and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraPro and Direxion Daily
The main advantage of trading using opposite ProShares UltraPro and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraPro 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 UltraPro vs. ProShares UltraPro Short | ProShares UltraPro vs. ProShares UltraPro Short | ProShares UltraPro vs. ProShares UltraPro SP500 | ProShares UltraPro vs. Direxion Daily SP |
| Direxion Daily vs. Direxion Daily Energy | Direxion Daily vs. Direxion Daily MSCI | Direxion Daily vs. Direxion Daily Financial | Direxion Daily vs. Direxion Daily Small |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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