Correlation Between ProShares Short and Direxion Daily

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Can any of the company-specific risk be diversified away by investing in both ProShares Short 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 Short 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 Short SP500 and Direxion Daily Semiconductor, you can compare the effects of market volatilities on ProShares Short 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 Short with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and Direxion Daily.

Diversification Opportunities for ProShares Short and Direxion Daily

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between ProShares and Direxion is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short SP500 and Direxion Daily Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Semic and ProShares Short 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 Short SP500 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 Semic has no effect on the direction of ProShares Short i.e., ProShares Short and Direxion Daily go up and down completely randomly.

Pair Corralation between ProShares Short and Direxion Daily

Allowing for the 90-day total investment horizon ProShares Short SP500 is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, ProShares Short SP500 is 11.03 times less risky than Direxion Daily. The etf trades about -0.01 of its potential returns per unit of risk. The Direxion Daily Semiconductor is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,188  in Direxion Daily Semiconductor on April 22, 2024 and sell it today you would earn a total of  282.00  from holding Direxion Daily Semiconductor or generate 12.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

ProShares Short SP500  vs.  Direxion Daily Semiconductor

 Performance 
       Timeline  
ProShares Short SP500 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ProShares Short SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Etf's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.
Direxion Daily Semic 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Direxion Daily Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in August 2024. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

ProShares Short and Direxion Daily Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares Short and Direxion Daily

The main advantage of trading using opposite ProShares Short and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Short 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 Short SP500 and Direxion Daily Semiconductor 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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