Correlation Between MicroSectors Solactive and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both MicroSectors Solactive 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 MicroSectors Solactive and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors Solactive FANG and Direxion Daily Select, you can compare the effects of market volatilities on MicroSectors Solactive 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 MicroSectors Solactive with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Solactive and Direxion Daily.
Diversification Opportunities for MicroSectors Solactive and Direxion Daily
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MicroSectors and Direxion is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Solactive FANG and Direxion Daily Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Select and MicroSectors Solactive 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 MicroSectors Solactive FANG 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 Select has no effect on the direction of MicroSectors Solactive i.e., MicroSectors Solactive and Direxion Daily go up and down completely randomly.
Pair Corralation between MicroSectors Solactive and Direxion Daily
Given the investment horizon of 90 days MicroSectors Solactive FANG is expected to generate 1.44 times more return on investment than Direxion Daily. However, MicroSectors Solactive is 1.44 times more volatile than Direxion Daily Select. It trades about 0.07 of its potential returns per unit of risk. Direxion Daily Select is currently generating about 0.09 per unit of risk. If you would invest 4,159 in MicroSectors Solactive FANG on December 10, 2024 and sell it today you would earn a total of 8,276 from holding MicroSectors Solactive FANG or generate 198.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors Solactive FANG vs. Direxion Daily Select
Performance |
| Timeline |
| MicroSectors Solactive |
| Direxion Daily Select |
MicroSectors Solactive and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors Solactive and Direxion Daily
The main advantage of trading using opposite MicroSectors Solactive and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors Solactive 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.| MicroSectors Solactive vs. MicroSectors FANG Index | MicroSectors Solactive vs. Direxion Daily Dow | MicroSectors Solactive vs. Direxion Daily Semiconductor |
| Direxion Daily vs. Direxion Daily Cloud | Direxion Daily vs. Direxion Daily Travel | Direxion Daily vs. Direxion Daily Dow | Direxion Daily vs. Direxion Daily Cnsmr |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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