Correlation Between Direxion Daily and ProShares UltraPro
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and ProShares UltraPro 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 UltraPro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Small and ProShares UltraPro Russell2000, you can compare the effects of market volatilities on Direxion Daily and ProShares UltraPro 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 UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and ProShares UltraPro.
Diversification Opportunities for Direxion Daily and ProShares UltraPro
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Direxion and ProShares is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Small and ProShares UltraPro Russell2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro 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 Small are associated (or correlated) with ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro has no effect on the direction of Direxion Daily i.e., Direxion Daily and ProShares UltraPro go up and down completely randomly.
Pair Corralation between Direxion Daily and ProShares UltraPro
Considering the 90-day investment horizon Direxion Daily Small is expected to generate 1.01 times more return on investment than ProShares UltraPro. However, Direxion Daily is 1.01 times more volatile than ProShares UltraPro Russell2000. It trades about 0.24 of its potential returns per unit of risk. ProShares UltraPro Russell2000 is currently generating about 0.2 per unit of risk. If you would invest 4,462 in Direxion Daily Small on August 27, 2024 and sell it today you would earn a total of 1,163 from holding Direxion Daily Small or generate 26.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Small vs. ProShares UltraPro Russell2000
Performance |
| Timeline |
| Direxion Daily Small |
| ProShares UltraPro |
Direxion Daily and ProShares UltraPro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and ProShares UltraPro
The main advantage of trading using opposite Direxion Daily and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, ProShares UltraPro 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 UltraPro will offset losses from the drop in ProShares UltraPro's long position.| Direxion Daily vs. Direxion Daily Small | Direxion Daily vs. Direxion Daily Financial | Direxion Daily vs. Direxion Daily Energy | Direxion Daily vs. Direxion Daily SP500 |
| ProShares UltraPro vs. ProShares UltraPro MidCap400 | ProShares UltraPro vs. ProShares UltraPro Short | ProShares UltraPro vs. ProShares UltraPro Dow30 | ProShares UltraPro vs. ProShares UltraPro 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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