Correlation Between Direxion Shares and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Direxion Shares and IShares Trust 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 Shares and IShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Shares ETF and iShares Trust , you can compare the effects of market volatilities on Direxion Shares and IShares Trust 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 Shares with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Shares and IShares Trust.
Diversification Opportunities for Direxion Shares and IShares Trust
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Direxion and IShares is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Shares ETF and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Direxion Shares 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 Shares ETF are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Direxion Shares i.e., Direxion Shares and IShares Trust go up and down completely randomly.
Pair Corralation between Direxion Shares and IShares Trust
Assuming the 90 days trading horizon Direxion Shares is expected to generate 1.8 times less return on investment than IShares Trust. In addition to that, Direxion Shares is 1.6 times more volatile than iShares Trust . It trades about 0.05 of its total potential returns per unit of risk. iShares Trust is currently generating about 0.14 per unit of volatility. If you would invest 269,792 in iShares Trust on September 3, 2024 and sell it today you would earn a total of 98,531 from holding iShares Trust or generate 36.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Direxion Shares ETF vs. iShares Trust
Performance |
| Timeline |
| Direxion Shares ETF |
| iShares Trust |
Direxion Shares and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Shares and IShares Trust
The main advantage of trading using opposite Direxion Shares and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Shares position performs unexpectedly, IShares Trust 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 IShares Trust will offset losses from the drop in IShares Trust's long position.| Direxion Shares vs. Direxion Shares ETF | Direxion Shares vs. Direxion Shares ETF | Direxion Shares vs. Direxion Shares ETF | Direxion Shares vs. iShares Trust |
| IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares iShares |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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