Correlation Between ProShares Ultra and Direxion

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

By analyzing existing cross correlation between ProShares Ultra Financials and Direxion, you can compare the effects of market volatilities on ProShares Ultra 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 Ultra with a short position of Direxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Ultra and Direxion.

Diversification Opportunities for ProShares Ultra and Direxion

-0.83

Correlation Coefficient

ProShares Ultra  Direxion

Pay attention - limited upside

The 3 months correlation between ProShares and Direxion is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Ultra Financials and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion 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 Financials 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 Ultra i.e., ProShares Ultra and Direxion go up and down completely randomly.

Pair Corralation between ProShares Ultra and Direxion

If you would invest  2,898  in Direxion on October 1, 2024 and sell it today you would earn a total of  0.00  from holding Direxion or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

ProShares Ultra Financials  vs.  Direxion

ProShares Ultra Fina

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Ultra Financials are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, ProShares Ultra reported solid returns over the last few months and may actually be approaching a breakup point.

Direxion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Direxion is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ProShares Ultra and Direxion

The main advantage of trading using opposite ProShares Ultra and Direxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares Ultra 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 Ultra Financials 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.