Correlation Between Direxion Shares and Invesco QQQ
Can any of the company-specific risk be diversified away by investing in both Direxion Shares and Invesco QQQ 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 Invesco QQQ 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 Invesco QQQ Trust, you can compare the effects of market volatilities on Direxion Shares and Invesco QQQ 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 Invesco QQQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Shares and Invesco QQQ.
Diversification Opportunities for Direxion Shares and Invesco QQQ
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Direxion and Invesco is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Shares ETF and Invesco QQQ Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco QQQ 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 Invesco QQQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco QQQ Trust has no effect on the direction of Direxion Shares i.e., Direxion Shares and Invesco QQQ go up and down completely randomly.
Pair Corralation between Direxion Shares and Invesco QQQ
Assuming the 90 days trading horizon Direxion Shares ETF is expected to under-perform the Invesco QQQ. In addition to that, Direxion Shares is 2.99 times more volatile than Invesco QQQ Trust. It trades about -0.01 of its total potential returns per unit of risk. Invesco QQQ Trust is currently generating about 0.14 per unit of volatility. If you would invest 657,616 in Invesco QQQ Trust on September 4, 2024 and sell it today you would earn a total of 392,116 from holding Invesco QQQ Trust or generate 59.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Shares ETF vs. Invesco QQQ Trust
Performance |
| Timeline |
| Direxion Shares ETF |
| Invesco QQQ Trust |
Direxion Shares and Invesco QQQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Shares and Invesco QQQ
The main advantage of trading using opposite Direxion Shares and Invesco QQQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Shares position performs unexpectedly, Invesco QQQ 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 Invesco QQQ will offset losses from the drop in Invesco QQQ's long position.| Direxion Shares vs. Vanguard Index Funds | Direxion Shares vs. Vanguard Index Funds | Direxion Shares vs. Vanguard STAR Funds | Direxion Shares vs. SPDR SP 500 |
| Invesco QQQ vs. Vanguard Index Funds | Invesco QQQ vs. Vanguard Index Funds | Invesco QQQ vs. Vanguard STAR Funds | Invesco QQQ vs. SPDR SP 500 |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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