Correlation Between ProShares Trust and Direxion Shares

Can any of the company-specific risk be diversified away by investing in both ProShares Trust 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 Trust 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 Trust and Direxion Shares ETF, you can compare the effects of market volatilities on ProShares Trust 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 Trust with a short position of Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Trust and Direxion Shares.

Diversification Opportunities for ProShares Trust and Direxion Shares

0.11

Correlation Coefficient

ProShares Trust  Direxion Shares

Average diversification

The 3 months correlation between ProShares and Direxion is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust 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 Trust 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 Trust 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 Trust i.e., ProShares Trust and Direxion Shares go up and down completely randomly.

Pair Corralation between ProShares Trust and Direxion Shares

Assuming the 90 days trading horizon ProShares Trust is expected to under-perform the Direxion Shares. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Trust is 1.47 times less risky than Direxion Shares. The etf trades about -0.18 of its potential returns per unit of risk. The Direxion Shares ETF is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  371,555  in Direxion Shares ETF on December 2, 2024 and sell it today you would earn a total of  962.00  from holding Direxion Shares ETF or generate 0.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

ProShares Trust   vs.  Direxion Shares ETF

ProShares Trust

Risk-Adjusted Performance

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 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.

Direxion Shares ETF

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Shares ETF are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Direxion Shares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProShares Trust and Direxion Shares

The main advantage of trading using opposite ProShares Trust and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Trust 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.

The idea behind ProShares Trust and Direxion Shares ETF 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..