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 20, 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
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between ProShares and Direxion is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro Short and Direxion Daily 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily 20 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 20 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
Considering the 90-day investment horizon ProShares UltraPro is expected to generate 1.02 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, ProShares UltraPro Short is 1.0 times less risky than Direxion Daily. It trades about 0.04 of its potential returns per unit of risk. Direxion Daily 20 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,426 in Direxion Daily 20 on August 29, 2024 and sell it today you would earn a total of 923.00 from holding Direxion Daily 20 or generate 38.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares UltraPro Short vs. Direxion Daily 20
Performance |
| Timeline |
| ProShares UltraPro Short |
| Direxion Daily 20 |
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. Direxion Daily 20 | ProShares UltraPro vs. Direxion Daily 7 10 | ProShares UltraPro vs. ProShares Short 20 | ProShares UltraPro vs. ProShares Short 7 10 |
| Direxion Daily vs. ProShares UltraShort 20 | Direxion Daily vs. ProShares Short 20 | Direxion Daily vs. ProShares UltraShort 7 10 |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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