Correlation Between Direxion Daily and Cambria Tail
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Cambria Tail 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 Cambria Tail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily SP and Cambria Tail Risk, you can compare the effects of market volatilities on Direxion Daily and Cambria Tail 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 Cambria Tail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Cambria Tail.
Diversification Opportunities for Direxion Daily and Cambria Tail
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and Cambria is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and Cambria Tail Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Tail Risk 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 SP are associated (or correlated) with Cambria Tail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Tail Risk has no effect on the direction of Direxion Daily i.e., Direxion Daily and Cambria Tail go up and down completely randomly.
Pair Corralation between Direxion Daily and Cambria Tail
Given the investment horizon of 90 days Direxion Daily SP is expected to under-perform the Cambria Tail. In addition to that, Direxion Daily is 4.02 times more volatile than Cambria Tail Risk. It trades about -0.02 of its total potential returns per unit of risk. Cambria Tail Risk is currently generating about -0.05 per unit of volatility. If you would invest 1,292 in Cambria Tail Risk on August 28, 2024 and sell it today you would lose (153.00) from holding Cambria Tail Risk or give up 11.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily SP vs. Cambria Tail Risk
Performance |
| Timeline |
| Direxion Daily SP |
| Cambria Tail Risk |
Direxion Daily and Cambria Tail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Cambria Tail
The main advantage of trading using opposite Direxion Daily and Cambria Tail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Cambria Tail 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 Cambria Tail will offset losses from the drop in Cambria Tail's long position.| Direxion Daily vs. First Trust Exchange Traded | Direxion Daily vs. Ultimus Managers Trust | Direxion Daily vs. Horizon Kinetics Medical | Direxion Daily vs. Harbor Health Care |
| Cambria Tail vs. Amplify BlackSwan Growth | Cambria Tail vs. AGFiQ Market Neutral | Cambria Tail vs. Quadratic Interest Rate | Cambria Tail vs. AdvisorShares Dorsey Wright |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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