Correlation Between American Express and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both American Express 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 American Express and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Direxion Daily Travel, you can compare the effects of market volatilities on American Express 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 American Express with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Direxion Daily.
Diversification Opportunities for American Express and Direxion Daily
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Direxion is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Direxion Daily Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Travel and American Express 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 American Express 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 Travel has no effect on the direction of American Express i.e., American Express and Direxion Daily go up and down completely randomly.
Pair Corralation between American Express and Direxion Daily
Considering the 90-day investment horizon American Express is expected to generate 2.19 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, American Express is 1.16 times less risky than Direxion Daily. It trades about 0.17 of its potential returns per unit of risk. Direxion Daily Travel is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,534 in Direxion Daily Travel on August 29, 2024 and sell it today you would earn a total of 464.00 from holding Direxion Daily Travel or generate 30.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Direxion Daily Travel
Performance |
| Timeline |
| American Express |
| Direxion Daily Travel |
American Express and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Direxion Daily
The main advantage of trading using opposite American Express and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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.| American Express vs. Visa Class A | American Express vs. Mastercard | American Express vs. Discover Financial Services |
| Direxion Daily vs. ABIVAX Socit Anonyme | Direxion Daily vs. Morningstar Unconstrained Allocation | Direxion Daily vs. SPACE | Direxion Daily vs. Knife River |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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