Correlation Between Direxion Daily and SEI Exchange
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and SEI Exchange 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 SEI Exchange 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 SEI Exchange Traded, you can compare the effects of market volatilities on Direxion Daily and SEI Exchange 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 SEI Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and SEI Exchange.
Diversification Opportunities for Direxion Daily and SEI Exchange
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direxion and SEI is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Regional and SEI Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Exchange Traded 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 SEI Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Exchange Traded has no effect on the direction of Direxion Daily i.e., Direxion Daily and SEI Exchange go up and down completely randomly.
Pair Corralation between Direxion Daily and SEI Exchange
Given the investment horizon of 90 days Direxion Daily Regional is expected to generate 11.09 times more return on investment than SEI Exchange. However, Direxion Daily is 11.09 times more volatile than SEI Exchange Traded. It trades about 0.13 of its potential returns per unit of risk. SEI Exchange Traded is currently generating about 0.21 per unit of risk. If you would invest 10,203 in Direxion Daily Regional on September 2, 2024 and sell it today you would earn a total of 5,441 from holding Direxion Daily Regional or generate 53.33% 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. SEI Exchange Traded
Performance |
| Timeline |
| Direxion Daily Regional |
| SEI Exchange Traded |
Direxion Daily and SEI Exchange Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and SEI Exchange
The main advantage of trading using opposite Direxion Daily and SEI Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, SEI Exchange 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 SEI Exchange will offset losses from the drop in SEI Exchange'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 |
| SEI Exchange vs. Vanguard Total Stock | SEI Exchange vs. SPDR SP 500 | SEI Exchange vs. iShares Core SP | SEI Exchange vs. Vanguard Dividend Appreciation |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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