Correlation Between Citigroup and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Citigroup 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 Citigroup and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Direxion Daily SP, you can compare the effects of market volatilities on Citigroup 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 Citigroup with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Direxion Daily.
Diversification Opportunities for Citigroup and Direxion Daily
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Citigroup and Direxion is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and Citigroup 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 Citigroup 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 SP has no effect on the direction of Citigroup i.e., Citigroup and Direxion Daily go up and down completely randomly.
Pair Corralation between Citigroup and Direxion Daily
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.32 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Citigroup is 2.99 times less risky than Direxion Daily. It trades about 0.11 of its potential returns per unit of risk. Direxion Daily SP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8,361 in Direxion Daily SP on August 27, 2024 and sell it today you would earn a total of 2,981 from holding Direxion Daily SP or generate 35.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Direxion Daily SP
Performance |
| Timeline |
| Citigroup |
| Direxion Daily SP |
Citigroup and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Direxion Daily
The main advantage of trading using opposite Citigroup and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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.| Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal |
| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Technology | Direxion Daily vs. Direxion Daily Small |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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