Correlation Between ProShares UltraPro and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both ProShares UltraPro and Direxion Shares 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 Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraPro SP500 and Direxion Shares ETF, you can compare the effects of market volatilities on ProShares UltraPro and Direxion Shares 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 Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and Direxion Shares.
Diversification Opportunities for ProShares UltraPro and Direxion Shares
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ProShares and Direxion is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro SP500 and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF 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 SP500 are associated (or correlated) with Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and Direxion Shares go up and down completely randomly.
Pair Corralation between ProShares UltraPro and Direxion Shares
Given the investment horizon of 90 days ProShares UltraPro is expected to generate 1.18 times less return on investment than Direxion Shares. But when comparing it to its historical volatility, ProShares UltraPro SP500 is 1.33 times less risky than Direxion Shares. It trades about 0.12 of its potential returns per unit of risk. Direxion Shares ETF is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,963 in Direxion Shares ETF on September 1, 2024 and sell it today you would earn a total of 1,305 from holding Direxion Shares ETF or generate 44.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
ProShares UltraPro SP500 vs. Direxion Shares ETF
Performance |
| Timeline |
| ProShares UltraPro SP500 |
| Direxion Shares ETF |
ProShares UltraPro and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraPro and Direxion Shares
The main advantage of trading using opposite ProShares UltraPro and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraPro position performs unexpectedly, Direxion Shares 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 Shares will offset losses from the drop in Direxion Shares' long position.| ProShares UltraPro vs. ProShares UltraPro Dow30 | ProShares UltraPro vs. ProShares UltraPro Short | ProShares UltraPro vs. ProShares UltraPro QQQ | ProShares UltraPro vs. Direxion Daily Small |
| Direxion Shares vs. FT Vest Equity | Direxion Shares vs. Northern Lights | Direxion Shares vs. Dimensional International High | Direxion Shares vs. Matthews China Discovery |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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