Correlation Between Direxion Daily and T REX
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and T REX 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 T REX 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 T REX 2X Long, you can compare the effects of market volatilities on Direxion Daily and T REX 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 T REX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and T REX.
Diversification Opportunities for Direxion Daily and T REX
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direxion and TSLT is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Regional and T REX 2X Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T REX 2X 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 T REX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T REX 2X has no effect on the direction of Direxion Daily i.e., Direxion Daily and T REX go up and down completely randomly.
Pair Corralation between Direxion Daily and T REX
Given the investment horizon of 90 days Direxion Daily is expected to generate 1.54 times less return on investment than T REX. But when comparing it to its historical volatility, Direxion Daily Regional is 1.49 times less risky than T REX. It trades about 0.11 of its potential returns per unit of risk. T REX 2X Long is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,069 in T REX 2X Long on September 3, 2024 and sell it today you would earn a total of 1,839 from holding T REX 2X Long or generate 172.03% 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. T REX 2X Long
Performance |
| Timeline |
| Direxion Daily Regional |
| T REX 2X |
Direxion Daily and T REX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and T REX
The main advantage of trading using opposite Direxion Daily and T REX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, T REX 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 T REX will offset losses from the drop in T REX'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 |
| T REX vs. ProShares Ultra SP500 | T REX vs. Direxion Daily SP500 | T REX vs. ProShares Ultra QQQ | T REX 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |