Correlation Between Direxion Daily and 2x Long
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and 2x Long 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 2x Long 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 2x Long VIX, you can compare the effects of market volatilities on Direxion Daily and 2x Long 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 2x Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and 2x Long.
Diversification Opportunities for Direxion Daily and 2x Long
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Direxion and UVIX is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Regional and 2x Long VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2x Long VIX 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 2x Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2x Long VIX has no effect on the direction of Direxion Daily i.e., Direxion Daily and 2x Long go up and down completely randomly.
Pair Corralation between Direxion Daily and 2x Long
Given the investment horizon of 90 days Direxion Daily Regional is expected to generate 1.43 times more return on investment than 2x Long. However, Direxion Daily is 1.43 times more volatile than 2x Long VIX. It trades about 0.23 of its potential returns per unit of risk. 2x Long VIX is currently generating about -0.35 per unit of risk. If you would invest 10,482 in Direxion Daily Regional on September 3, 2024 and sell it today you would earn a total of 4,714 from holding Direxion Daily Regional or generate 44.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Regional vs. 2x Long VIX
Performance |
| Timeline |
| Direxion Daily Regional |
| 2x Long VIX |
Direxion Daily and 2x Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and 2x Long
The main advantage of trading using opposite Direxion Daily and 2x Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, 2x Long 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 2x Long will offset losses from the drop in 2x Long'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 |
| 2x Long vs. 1x Short VIX | 2x Long vs. ProShares UltraShort Bloomberg | 2x Long vs. MicroSectors FANG Index | 2x Long vs. AXS TSLA Bear |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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