Correlation Between Direxion Shares and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Direxion Shares 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 Direxion Shares and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Shares ETF and Direxion Daily GOOGL, you can compare the effects of market volatilities on Direxion Shares 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 Direxion Shares with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Shares and Direxion Daily.
Diversification Opportunities for Direxion Shares and Direxion Daily
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Direxion and Direxion is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Shares ETF and Direxion Daily GOOGL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily GOOGL and Direxion Shares 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 Direxion Shares ETF 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 GOOGL has no effect on the direction of Direxion Shares i.e., Direxion Shares and Direxion Daily go up and down completely randomly.
Pair Corralation between Direxion Shares and Direxion Daily
Given the investment horizon of 90 days Direxion Shares ETF is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, Direxion Shares ETF is 1.95 times less risky than Direxion Daily. The etf trades about -0.02 of its potential returns per unit of risk. The Direxion Daily GOOGL is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,733 in Direxion Daily GOOGL on August 28, 2024 and sell it today you would lose (21.00) from holding Direxion Daily GOOGL or give up 0.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Shares ETF vs. Direxion Daily GOOGL
Performance |
| Timeline |
| Direxion Shares ETF |
| Direxion Daily GOOGL |
Direxion Shares and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Shares and Direxion Daily
The main advantage of trading using opposite Direxion Shares and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Shares 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.| Direxion Shares vs. Direxion Daily AMZN | Direxion Shares vs. Direxion Daily MSFT | Direxion Shares vs. Direxion Daily GOOGL | Direxion Shares vs. Direxion Shares ETF |
| Direxion Daily vs. Direxion Daily AMZN | Direxion Daily vs. Direxion Daily MSFT | Direxion Daily vs. Direxion Shares ETF | Direxion Daily vs. Direxion Shares ETF |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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