Correlation Between Direxion Daily and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and SPDR SP 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 Daily and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily AVGO and SPDR SP 500, you can compare the effects of market volatilities on Direxion Daily and SPDR SP 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 Daily with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and SPDR SP.
Diversification Opportunities for Direxion Daily and SPDR SP
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Direxion and SPDR is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily AVGO and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 and Direxion Daily 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 Daily AVGO are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of Direxion Daily i.e., Direxion Daily and SPDR SP go up and down completely randomly.
Pair Corralation between Direxion Daily and SPDR SP
Considering the 90-day investment horizon Direxion Daily AVGO is expected to generate 9.83 times more return on investment than SPDR SP. However, Direxion Daily is 9.83 times more volatile than SPDR SP 500. It trades about 0.15 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.11 per unit of risk. If you would invest 2,115 in Direxion Daily AVGO on October 26, 2024 and sell it today you would earn a total of 1,589 from holding Direxion Daily AVGO or generate 75.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily AVGO vs. SPDR SP 500
Performance |
| Timeline |
| Direxion Daily AVGO |
| SPDR SP 500 |
Direxion Daily and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and SPDR SP
The main advantage of trading using opposite Direxion Daily and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| Direxion Daily vs. Vanguard Total Stock | Direxion Daily vs. SPDR SP 500 | Direxion Daily vs. iShares Core SP | Direxion Daily vs. Vanguard Total Bond |
| SPDR SP vs. FT Vest Equity | SPDR SP vs. Zillow Group Class | SPDR SP vs. Northern Lights | SPDR SP vs. VanEck Vectors Moodys |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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