Correlation Between Direxion Shares and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Direxion Shares and ProShares UltraShort 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 Shares and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Shares ETF and ProShares UltraShort MSCI, you can compare the effects of market volatilities on Direxion Shares and ProShares UltraShort 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 Shares with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Shares and ProShares UltraShort.
Diversification Opportunities for Direxion Shares and ProShares UltraShort
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and ProShares is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Shares ETF and ProShares UltraShort MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort MSCI and Direxion Shares 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 Shares ETF are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort MSCI has no effect on the direction of Direxion Shares i.e., Direxion Shares and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Direxion Shares and ProShares UltraShort
Given the investment horizon of 90 days Direxion Shares ETF is expected to under-perform the ProShares UltraShort. In addition to that, Direxion Shares is 1.81 times more volatile than ProShares UltraShort MSCI. It trades about -0.05 of its total potential returns per unit of risk. ProShares UltraShort MSCI is currently generating about -0.04 per unit of volatility. If you would invest 5,094 in ProShares UltraShort MSCI on September 4, 2024 and sell it today you would lose (1,243) from holding ProShares UltraShort MSCI or give up 24.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Shares ETF vs. ProShares UltraShort MSCI
Performance |
| Timeline |
| Direxion Shares ETF |
| ProShares UltraShort MSCI |
Direxion Shares and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Shares and ProShares UltraShort
The main advantage of trading using opposite Direxion Shares and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Shares position performs unexpectedly, ProShares UltraShort 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 UltraShort will offset losses from the drop in ProShares UltraShort's long position.| Direxion Shares vs. ProShares UltraShort MSCI | Direxion Shares vs. ProShares Ultra MSCI | Direxion Shares vs. ProShares UltraShort MSCI | Direxion Shares vs. Direxion Daily MSCI |
| ProShares UltraShort vs. ProShares UltraShort MSCI | ProShares UltraShort vs. ProShares Short MSCI | ProShares UltraShort vs. ProShares UltraShort MSCI | ProShares UltraShort 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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