Correlation Between Direxion Daily and Quadratic Deflation
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Quadratic Deflation 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 Quadratic Deflation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Regional and Quadratic Deflation ETF, you can compare the effects of market volatilities on Direxion Daily and Quadratic Deflation 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 Quadratic Deflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Quadratic Deflation.
Diversification Opportunities for Direxion Daily and Quadratic Deflation
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Direxion and Quadratic is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Regional and Quadratic Deflation ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quadratic Deflation ETF 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 Regional are associated (or correlated) with Quadratic Deflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quadratic Deflation ETF has no effect on the direction of Direxion Daily i.e., Direxion Daily and Quadratic Deflation go up and down completely randomly.
Pair Corralation between Direxion Daily and Quadratic Deflation
Given the investment horizon of 90 days Direxion Daily Regional is expected to generate 7.39 times more return on investment than Quadratic Deflation. However, Direxion Daily is 7.39 times more volatile than Quadratic Deflation ETF. It trades about 0.1 of its potential returns per unit of risk. Quadratic Deflation ETF is currently generating about -0.02 per unit of risk. If you would invest 7,472 in Direxion Daily Regional on September 1, 2024 and sell it today you would earn a total of 8,172 from holding Direxion Daily Regional or generate 109.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Regional vs. Quadratic Deflation ETF
Performance |
| Timeline |
| Direxion Daily Regional |
| Quadratic Deflation ETF |
Direxion Daily and Quadratic Deflation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Quadratic Deflation
The main advantage of trading using opposite Direxion Daily and Quadratic Deflation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Quadratic Deflation 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 Quadratic Deflation will offset losses from the drop in Quadratic Deflation's long position.| Direxion Daily vs. Direxion Daily Homebuilders | Direxion Daily vs. Direxion Daily Retail | Direxion Daily vs. Direxion Daily Transportation | Direxion Daily vs. Direxion Daily Aerospace |
| Quadratic Deflation vs. SPDR Barclays Short | Quadratic Deflation vs. SPDR Portfolio Intermediate | Quadratic Deflation vs. SPDR Barclays Long | Quadratic Deflation vs. SPDR Barclays Intermediate |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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