Correlation Between Direxion Daily and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Invesco DWA 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 Invesco DWA 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 Invesco DWA Basic, you can compare the effects of market volatilities on Direxion Daily and Invesco DWA 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 Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Invesco DWA.
Diversification Opportunities for Direxion Daily and Invesco DWA
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direxion and Invesco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Regional and Invesco DWA Basic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Basic 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 Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Basic has no effect on the direction of Direxion Daily i.e., Direxion Daily and Invesco DWA go up and down completely randomly.
Pair Corralation between Direxion Daily and Invesco DWA
Given the investment horizon of 90 days Direxion Daily Regional is expected to generate 4.7 times more return on investment than Invesco DWA. However, Direxion Daily is 4.7 times more volatile than Invesco DWA Basic. It trades about 0.24 of its potential returns per unit of risk. Invesco DWA Basic is currently generating about 0.28 per unit of risk. If you would invest 10,605 in Direxion Daily Regional on November 3, 2024 and sell it today you would earn a total of 2,268 from holding Direxion Daily Regional or generate 21.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Regional vs. Invesco DWA Basic
Performance |
| Timeline |
| Direxion Daily Regional |
| Invesco DWA Basic |
Direxion Daily and Invesco DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Invesco DWA
The main advantage of trading using opposite Direxion Daily and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Invesco DWA 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 Invesco DWA will offset losses from the drop in Invesco DWA'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 |
| Invesco DWA vs. Ultimus Managers Trust | Invesco DWA vs. American Beacon Select | Invesco DWA vs. First Trust Indxx | Invesco DWA vs. Direxion Daily SP |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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