Correlation Between VanEck Africa and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both VanEck Africa 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 VanEck Africa and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Africa Index and Direxion Daily MSCI, you can compare the effects of market volatilities on VanEck Africa 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 VanEck Africa with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Africa and Direxion Daily.
Diversification Opportunities for VanEck Africa and Direxion Daily
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between VanEck and Direxion is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Africa Index and Direxion Daily MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily MSCI and VanEck Africa 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 VanEck Africa Index 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 MSCI has no effect on the direction of VanEck Africa i.e., VanEck Africa and Direxion Daily go up and down completely randomly.
Pair Corralation between VanEck Africa and Direxion Daily
Considering the 90-day investment horizon VanEck Africa Index is expected to generate 0.37 times more return on investment than Direxion Daily. However, VanEck Africa Index is 2.68 times less risky than Direxion Daily. It trades about 0.04 of its potential returns per unit of risk. Direxion Daily MSCI is currently generating about -0.08 per unit of risk. If you would invest 1,562 in VanEck Africa Index on August 31, 2024 and sell it today you would earn a total of 43.00 from holding VanEck Africa Index or generate 2.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
VanEck Africa Index vs. Direxion Daily MSCI
Performance |
| Timeline |
| VanEck Africa Index |
| Direxion Daily MSCI |
VanEck Africa and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Africa and Direxion Daily
The main advantage of trading using opposite VanEck Africa and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Africa 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.| VanEck Africa vs. iShares MSCI South | VanEck Africa vs. VanEck Indonesia Index | VanEck Africa vs. iShares MSCI Thailand |
| Direxion Daily vs. Direxion Daily FTSE | Direxion Daily vs. Direxion Daily South | Direxion Daily vs. Direxion Daily Industrials | Direxion Daily vs. Direxion Daily Utilities |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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