Correlation Between Direxion Daily and Fidelity MSCI
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Fidelity MSCI 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 Fidelity MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Industrials and Fidelity MSCI Industrials, you can compare the effects of market volatilities on Direxion Daily and Fidelity MSCI 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 Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Fidelity MSCI.
Diversification Opportunities for Direxion Daily and Fidelity MSCI
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Direxion and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Industrials and Fidelity MSCI Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Industrials 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 Industrials are associated (or correlated) with Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Industrials has no effect on the direction of Direxion Daily i.e., Direxion Daily and Fidelity MSCI go up and down completely randomly.
Pair Corralation between Direxion Daily and Fidelity MSCI
Given the investment horizon of 90 days Direxion Daily Industrials is expected to generate 2.89 times more return on investment than Fidelity MSCI. However, Direxion Daily is 2.89 times more volatile than Fidelity MSCI Industrials. It trades about 0.3 of its potential returns per unit of risk. Fidelity MSCI Industrials is currently generating about 0.28 per unit of risk. If you would invest 5,435 in Direxion Daily Industrials on November 3, 2024 and sell it today you would earn a total of 970.00 from holding Direxion Daily Industrials or generate 17.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Industrials vs. Fidelity MSCI Industrials
Performance |
| Timeline |
| Direxion Daily Indus |
| Fidelity MSCI Industrials |
Direxion Daily and Fidelity MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Fidelity MSCI
The main advantage of trading using opposite Direxion Daily and Fidelity MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Fidelity MSCI 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 Fidelity MSCI will offset losses from the drop in Fidelity MSCI's long position.| Direxion Daily vs. Direxion Daily Transportation | Direxion Daily vs. Direxion Daily Utilities | Direxion Daily vs. Direxion Daily Cnsmr | Direxion Daily vs. Direxion Daily Retail |
| Fidelity MSCI vs. Fidelity MSCI Materials | Fidelity MSCI vs. Fidelity MSCI Financials | Fidelity MSCI vs. Fidelity MSCI Consumer | Fidelity MSCI vs. Fidelity MSCI Consumer |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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