Correlation Between ProShares Ultra and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both ProShares Ultra 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 Ultra 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 Ultra SP500 and Direxion Daily Aerospace, you can compare the effects of market volatilities on ProShares Ultra 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 Ultra with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Direxion Daily.
Diversification Opportunities for ProShares Ultra 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 Ultra SP500 and Direxion Daily Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Aerospace and ProShares Ultra 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 Ultra SP500 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 Aerospace has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Direxion Daily go up and down completely randomly.
Pair Corralation between ProShares Ultra and Direxion Daily
Considering the 90-day investment horizon ProShares Ultra is expected to generate 1.1 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, ProShares Ultra SP500 is 1.77 times less risky than Direxion Daily. It trades about 0.09 of its potential returns per unit of risk. Direxion Daily Aerospace is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,018 in Direxion Daily Aerospace on August 24, 2024 and sell it today you would earn a total of 1,760 from holding Direxion Daily Aerospace or generate 87.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Ultra SP500 vs. Direxion Daily Aerospace
Performance |
| Timeline |
| ProShares Ultra SP500 |
| Direxion Daily Aerospace |
ProShares Ultra and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares Ultra and Direxion Daily
The main advantage of trading using opposite ProShares Ultra and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra 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 Ultra vs. ProShares Ultra QQQ | ProShares Ultra vs. ProShares Ultra Dow30 | ProShares Ultra vs. ProShares UltraShort SP500 | ProShares Ultra vs. ProShares Ultra Financials |
| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Technology | 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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