Correlation Between Direxion Daily and ProShares UltraPro

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and ProShares UltraPro 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 Daily and ProShares UltraPro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Direxion Daily Aerospace and ProShares UltraPro SP500, you can compare the effects of market volatilities on Direxion Daily and ProShares UltraPro 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 Daily with a short position of ProShares UltraPro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and ProShares UltraPro.

Diversification Opportunities for Direxion Daily and ProShares UltraPro

0.2

Correlation Coefficient

Direxion Daily  ProShares UltraPro

Modest diversification

The 3 months correlation between Direxion and ProShares is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Aerospace and ProShares UltraPro SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraPro SP500 and Direxion Daily 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 Daily Aerospace are associated (or correlated) with ProShares UltraPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraPro SP500 has no effect on the direction of Direxion Daily i.e., Direxion Daily and ProShares UltraPro go up and down completely randomly.

Pair Corralation between Direxion Daily and ProShares UltraPro

Given the investment horizon of 90 days Direxion Daily Aerospace is expected to under-perform the ProShares UltraPro. In addition to that, Direxion Daily is 1.51 times more volatile than ProShares UltraPro SP500. It trades about -0.21 of its total potential returns per unit of risk. ProShares UltraPro SP500 is currently generating about -0.04 per unit of volatility. If you would invest  9,394  in ProShares UltraPro SP500 on September 23, 2024 and sell it today you would lose (246.00) from holding ProShares UltraPro SP500 or give up 2.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Direxion Daily Aerospace  vs.  ProShares UltraPro SP500

Direxion Daily Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

ProShares UltraPro SP500

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro SP500 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, ProShares UltraPro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Direxion Daily and ProShares UltraPro

The main advantage of trading using opposite Direxion Daily and ProShares UltraPro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, ProShares UltraPro 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 UltraPro will offset losses from the drop in ProShares UltraPro's long position.

The idea behind Direxion Daily Aerospace and ProShares UltraPro SP500 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.