Correlation Between ProShares Ultra and Direxion Daily

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

Diversification Opportunities for ProShares Ultra and Direxion Daily

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between ProShares and Direxion is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra SP500 and Direxion Daily Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Regional and ProShares Ultra 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 Ultra 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 Regional has no effect on the direction of ProShares Ultra i.e., ProShares Ultra and Direxion Daily go up and down completely randomly.

Pair Corralation between ProShares Ultra and Direxion Daily

Considering the 90-day investment horizon ProShares Ultra SP500 is expected to generate 0.38 times more return on investment than Direxion Daily. However, ProShares Ultra SP500 is 2.66 times less risky than Direxion Daily. It trades about 0.25 of its potential returns per unit of risk. Direxion Daily Regional is currently generating about -0.04 per unit of risk. If you would invest  7,195  in ProShares Ultra SP500 on February 24, 2024 and sell it today you would earn a total of  545.00  from holding ProShares Ultra SP500 or generate 7.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

ProShares Ultra SP500  vs.  Direxion Daily Regional

 Performance 
       Timeline  
ProShares Ultra SP500 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra SP500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, ProShares Ultra may actually be approaching a critical reversion point that can send shares even higher in June 2024.
Direxion Daily Regional 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Regional are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in June 2024.

ProShares Ultra and Direxion Daily Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares Ultra and Direxion Daily

The main advantage of trading using opposite ProShares Ultra and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra 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 Ultra SP500 and Direxion Daily Regional 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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