Correlation Between ProShares UltraPro and Direxion Daily

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Can any of the company-specific risk be diversified away by investing in both ProShares UltraPro 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 UltraPro 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 UltraPro Short and Direxion Daily 20, you can compare the effects of market volatilities on ProShares UltraPro 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 UltraPro with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraPro and Direxion Daily.

Diversification Opportunities for ProShares UltraPro and Direxion Daily

ProSharesDirexionProSharesDirexionDiversified Away100%
1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between ProShares and Direxion is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraPro Short and Direxion Daily 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily 20 and ProShares UltraPro 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 UltraPro Short 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 20 has no effect on the direction of ProShares UltraPro i.e., ProShares UltraPro and Direxion Daily go up and down completely randomly.

Pair Corralation between ProShares UltraPro and Direxion Daily

Considering the 90-day investment horizon ProShares UltraPro Short is expected to generate 1.0 times more return on investment than Direxion Daily. However, ProShares UltraPro is 1.0 times more volatile than Direxion Daily 20. It trades about 0.2 of its potential returns per unit of risk. Direxion Daily 20 is currently generating about 0.2 per unit of risk. If you would invest  5,680  in ProShares UltraPro Short on September 27, 2024 and sell it today you would earn a total of  2,104  from holding ProShares UltraPro Short or generate 37.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

ProShares UltraPro Short  vs.  Direxion Daily 20

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 051015202530
JavaScript chart by amCharts 3.21.15TTT TMV
       Timeline  
ProShares UltraPro Short 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares UltraPro Short are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, ProShares UltraPro unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec556065707580
Direxion Daily 20 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily 20 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, Direxion Daily showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec28303234363840

ProShares UltraPro and Direxion Daily Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.99-5.99-3.98-1.970.03342.214.436.648.86 0.020.030.040.05
JavaScript chart by amCharts 3.21.15TTT TMV
       Returns  

Pair Trading with ProShares UltraPro and Direxion Daily

The main advantage of trading using opposite ProShares UltraPro and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraPro 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.
The idea behind ProShares UltraPro Short and Direxion Daily 20 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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