Correlation Between ProShares UltraShort and Direxion
Can any of the company-specific risk be diversified away by investing in both ProShares UltraShort and Direxion 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 UltraShort and Direxion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares UltraShort SmallCap600 and Direxion, you can compare the effects of market volatilities on ProShares UltraShort and Direxion 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 UltraShort with a short position of Direxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares UltraShort and Direxion.
Diversification Opportunities for ProShares UltraShort and Direxion
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ProShares and Direxion is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding ProShares UltraShort SmallCap6 and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion and ProShares UltraShort 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 UltraShort SmallCap600 are associated (or correlated) with Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of ProShares UltraShort i.e., ProShares UltraShort and Direxion go up and down completely randomly.
Pair Corralation between ProShares UltraShort and Direxion
If you would invest 2,105 in ProShares UltraShort SmallCap600 on January 24, 2024 and sell it today you would lose (184.00) from holding ProShares UltraShort SmallCap600 or give up 8.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 0.34% |
| Values | Daily Returns |
ProShares UltraShort SmallCap6 vs. Direxion
Performance |
| Timeline |
| ProShares UltraShort |
| Direxion |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
ProShares UltraShort and Direxion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares UltraShort and Direxion
The main advantage of trading using opposite ProShares UltraShort and Direxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares UltraShort position performs unexpectedly, Direxion 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 will offset losses from the drop in Direxion's long position.The idea behind ProShares UltraShort SmallCap600 and Direxion 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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