Correlation Between Direxion Daily and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Invesco SP 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 SP 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 SP 500, you can compare the effects of market volatilities on Direxion Daily and Invesco SP 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 SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Invesco SP.
Diversification Opportunities for Direxion Daily and Invesco SP
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and Invesco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Regional and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Direxion Daily i.e., Direxion Daily and Invesco SP go up and down completely randomly.
Pair Corralation between Direxion Daily and Invesco SP
Given the investment horizon of 90 days Direxion Daily Regional is expected to under-perform the Invesco SP. In addition to that, Direxion Daily is 2.8 times more volatile than Invesco SP 500. It trades about -0.06 of its total potential returns per unit of risk. Invesco SP 500 is currently generating about 0.03 per unit of volatility. If you would invest 3,889 in Invesco SP 500 on September 12, 2024 and sell it today you would earn a total of 18.00 from holding Invesco SP 500 or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Regional vs. Invesco SP 500
Performance |
| Timeline |
| Direxion Daily Regional |
| Invesco SP 500 |
Direxion Daily and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Invesco SP
The main advantage of trading using opposite Direxion Daily and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Invesco SP 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 SP will offset losses from the drop in Invesco SP's long position.| Direxion Daily vs. ProShares Ultra SP500 | Direxion Daily vs. Direxion Daily SP500 | Direxion Daily vs. ProShares Ultra QQQ | Direxion Daily vs. Direxion Daily SP |
| Invesco SP vs. American Beacon Select | Invesco SP vs. Columbia Emerging Markets | Invesco SP vs. Direxion Daily Homebuilders | Invesco SP 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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