Correlation Between Direxion Shares and ProShares Trust

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

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

Diversification Opportunities for Direxion Shares and ProShares Trust

-0.31

Correlation Coefficient

Direxion Shares  ProShares Trust

Very good diversification

The 3 months correlation between Direxion and ProShares is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Shares ETF and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust and Direxion Shares 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 Shares ETF are associated (or correlated) with ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of Direxion Shares i.e., Direxion Shares and ProShares Trust go up and down completely randomly.

Pair Corralation between Direxion Shares and ProShares Trust

Assuming the 90 days trading horizon Direxion Shares ETF is expected to generate 2.51 times more return on investment than ProShares Trust. However, Direxion Shares is 2.51 times more volatile than ProShares Trust . It trades about 0.14 of its potential returns per unit of risk. ProShares Trust is currently generating about -0.07 per unit of risk. If you would invest  246,545  in Direxion Shares ETF on September 16, 2024 and sell it today you would earn a total of  78,555  from holding Direxion Shares ETF or generate 31.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Direxion Shares ETF  vs.  ProShares Trust

Direxion Shares ETF

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Shares ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Direxion Shares showed solid returns over the last few months and may actually be approaching a breakup point.

ProShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, ProShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Shares and ProShares Trust

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

The idea behind Direxion Shares ETF and ProShares Trust 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.