Correlation Between Direxion Daily and UBS ETRACS
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and UBS ETRACS 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 UBS ETRACS 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 UBS ETRACS , you can compare the effects of market volatilities on Direxion Daily and UBS ETRACS 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 UBS ETRACS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and UBS ETRACS.
Diversification Opportunities for Direxion Daily and UBS ETRACS
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Direxion and UBS is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and UBS ETRACS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETRACS 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 UBS ETRACS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETRACS has no effect on the direction of Direxion Daily i.e., Direxion Daily and UBS ETRACS go up and down completely randomly.
Pair Corralation between Direxion Daily and UBS ETRACS
Given the investment horizon of 90 days Direxion Daily SP is expected to under-perform the UBS ETRACS. But the etf apears to be less risky and, when comparing its historical volatility, Direxion Daily SP is 1.09 times less risky than UBS ETRACS. The etf trades about -0.28 of its potential returns per unit of risk. The UBS ETRACS is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest 1,835 in UBS ETRACS on August 26, 2024 and sell it today you would lose (320.00) from holding UBS ETRACS or give up 17.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily SP vs. UBS ETRACS
Performance |
| Timeline |
| Direxion Daily SP |
| UBS ETRACS |
Direxion Daily and UBS ETRACS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and UBS ETRACS
The main advantage of trading using opposite Direxion Daily and UBS ETRACS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, UBS ETRACS 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 UBS ETRACS will offset losses from the drop in UBS ETRACS'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 |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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