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 MSCI and Direxion Daily MSCI, 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
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ProShares and Direxion is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra MSCI and Direxion Daily MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily MSCI 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 MSCI 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 MSCI 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 MSCI is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Ultra MSCI is 1.31 times less risky than Direxion Daily. The etf trades about -0.25 of its potential returns per unit of risk. The Direxion Daily MSCI is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 1,201 in Direxion Daily MSCI on September 1, 2024 and sell it today you would lose (130.00) from holding Direxion Daily MSCI or give up 10.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Ultra MSCI vs. Direxion Daily MSCI
Performance |
| Timeline |
| ProShares Ultra MSCI |
| Direxion Daily MSCI |
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. Direxion Daily MSCI | ProShares Ultra vs. Innovator MSCI Emerging | ProShares Ultra vs. Innovator ETFs Trust | ProShares Ultra vs. Innovator MSCI Emerging |
| Direxion Daily vs. Direxion Daily FTSE | Direxion Daily vs. Direxion Daily South | Direxion Daily vs. Direxion Daily Industrials | Direxion Daily vs. Direxion Daily Utilities |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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