Correlation Between Direxion Daily and Simplify Equity
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Simplify Equity 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 Simplify Equity 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 Simplify Equity PLUS, you can compare the effects of market volatilities on Direxion Daily and Simplify Equity 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 Simplify Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Simplify Equity.
Diversification Opportunities for Direxion Daily and Simplify Equity
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direxion and Simplify is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Regional and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS 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 Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of Direxion Daily i.e., Direxion Daily and Simplify Equity go up and down completely randomly.
Pair Corralation between Direxion Daily and Simplify Equity
Given the investment horizon of 90 days Direxion Daily Regional is expected to generate 7.79 times more return on investment than Simplify Equity. However, Direxion Daily is 7.79 times more volatile than Simplify Equity PLUS. It trades about 0.22 of its potential returns per unit of risk. Simplify Equity PLUS is currently generating about 0.32 per unit of risk. If you would invest 10,935 in Direxion Daily Regional on September 1, 2024 and sell it today you would earn a total of 4,709 from holding Direxion Daily Regional or generate 43.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Direxion Daily Regional vs. Simplify Equity PLUS
Performance |
| Timeline |
| Direxion Daily Regional |
| Simplify Equity PLUS |
Direxion Daily and Simplify Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Simplify Equity
The main advantage of trading using opposite Direxion Daily and Simplify Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Simplify Equity 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 Simplify Equity will offset losses from the drop in Simplify Equity'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 |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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