Correlation Between Direxion Daily and American Century
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and American Century 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 American Century 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 American Century Short, you can compare the effects of market volatilities on Direxion Daily and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and American Century.
Diversification Opportunities for Direxion Daily and American Century
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and American is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Regional and American Century Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century Short 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century Short has no effect on the direction of Direxion Daily i.e., Direxion Daily and American Century go up and down completely randomly.
Pair Corralation between Direxion Daily and American Century
Given the investment horizon of 90 days Direxion Daily Regional is expected to generate 90.39 times more return on investment than American Century. However, Direxion Daily is 90.39 times more volatile than American Century Short. It trades about 0.2 of its potential returns per unit of risk. American Century Short is currently generating about 0.04 per unit of risk. If you would invest 11,332 in Direxion Daily Regional on August 29, 2024 and sell it today you would earn a total of 4,627 from holding Direxion Daily Regional or generate 40.83% 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. American Century Short
Performance |
| Timeline |
| Direxion Daily Regional |
| American Century Short |
Direxion Daily and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and American Century
The main advantage of trading using opposite Direxion Daily and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century'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 |
| American Century vs. iShares 5 10 Year | American Century vs. iShares 0 5 Year | American Century vs. SPDR Barclays Short | American Century vs. iShares Core Total |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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