Correlation Between Direxion Daily and ProShares Decline

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

By analyzing existing cross correlation between Direxion Daily SP and ProShares Decline of, you can compare the effects of market volatilities on Direxion Daily and ProShares Decline 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 Decline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and ProShares Decline.

Diversification Opportunities for Direxion Daily and ProShares Decline

0.73

Correlation Coefficient

Direxion Daily  ProShares Decline

Poor diversification

The 3 months correlation between Direxion and ProShares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and ProShares Decline of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Decline 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 SP are associated (or correlated) with ProShares Decline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Decline has no effect on the direction of Direxion Daily i.e., Direxion Daily and ProShares Decline go up and down completely randomly.

Pair Corralation between Direxion Daily and ProShares Decline

Given the investment horizon of 90 days Direxion Daily is expected to generate 2.07 times less return on investment than ProShares Decline. But when comparing it to its historical volatility, Direxion Daily SP is 1.34 times less risky than ProShares Decline. It trades about 0.22 of its potential returns per unit of risk. ProShares Decline of is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  1,291  in ProShares Decline of on December 5, 2024 and sell it today you would earn a total of  116.00  from holding ProShares Decline of or generate 8.99% return on investment over 90 days.

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

Direxion Daily SP  vs.  ProShares Decline of

Direxion Daily SP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ProShares Decline

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Decline of are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ProShares Decline showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and ProShares Decline

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

The idea behind Direxion Daily SP and ProShares Decline of 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.