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 Financials and Direxion Daily South, 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
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ProShares and Direxion is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Financials and Direxion Daily South in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily South 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 Financials 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 South 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 Financials is expected to generate 0.69 times more return on investment than Direxion Daily. However, ProShares Ultra Financials is 1.46 times less risky than Direxion Daily. It trades about 0.25 of its potential returns per unit of risk. Direxion Daily South is currently generating about -0.16 per unit of risk. If you would invest 8,067 in ProShares Ultra Financials on August 26, 2024 and sell it today you would earn a total of 1,373 from holding ProShares Ultra Financials or generate 17.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares Ultra Financials vs. Direxion Daily South
Performance |
| Timeline |
| ProShares Ultra Fina |
| Direxion Daily South |
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. ProShares Ultra Real | ProShares Ultra vs. ProShares UltraShort Financials | ProShares Ultra vs. ProShares Ultra Basic | ProShares Ultra vs. ProShares Ultra Oil |
| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Semiconductor |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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