Correlation Between Direxion Daily and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Direxion Daily 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 Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Energy and Direxion Daily Small, you can compare the effects of market volatilities on Direxion Daily and Direxion Daily 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 Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Direxion Daily.
Diversification Opportunities for Direxion Daily and Direxion Daily
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and Direxion is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Energy and Direxion Daily Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Small 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 Energy are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Small has no effect on the direction of Direxion Daily i.e., Direxion Daily and Direxion Daily go up and down completely randomly.
Pair Corralation between Direxion Daily and Direxion Daily
Considering the 90-day investment horizon Direxion Daily is expected to generate 1.99 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Direxion Daily Energy is 2.09 times less risky than Direxion Daily. It trades about 0.26 of its potential returns per unit of risk. Direxion Daily Small is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 4,462 in Direxion Daily Small on August 28, 2024 and sell it today you would earn a total of 1,163 from holding Direxion Daily Small or generate 26.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Energy vs. Direxion Daily Small
Performance |
| Timeline |
| Direxion Daily Energy |
| Direxion Daily Small |
Direxion Daily and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Direxion Daily
The main advantage of trading using opposite Direxion Daily and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Direxion Daily 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 Direxion Daily will offset losses from the drop in Direxion Daily's long position.| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Semiconductor |
| Direxion Daily vs. Direxion Daily Small | Direxion Daily vs. Direxion Daily Financial | Direxion Daily vs. Direxion Daily Energy | Direxion Daily vs. Direxion Daily SP500 |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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