Correlation Between Direxion Daily and Franklin Electric
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Franklin Electric 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 Franklin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily FTSE and Franklin Electric Co, you can compare the effects of market volatilities on Direxion Daily and Franklin Electric 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 Franklin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Franklin Electric.
Diversification Opportunities for Direxion Daily and Franklin Electric
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Direxion and Franklin is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily FTSE and Franklin Electric Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Electric 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 FTSE are associated (or correlated) with Franklin Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Electric has no effect on the direction of Direxion Daily i.e., Direxion Daily and Franklin Electric go up and down completely randomly.
Pair Corralation between Direxion Daily and Franklin Electric
Given the investment horizon of 90 days Direxion Daily FTSE is expected to generate 1.29 times more return on investment than Franklin Electric. However, Direxion Daily is 1.29 times more volatile than Franklin Electric Co. It trades about 0.41 of its potential returns per unit of risk. Franklin Electric Co is currently generating about 0.17 per unit of risk. If you would invest 2,323 in Direxion Daily FTSE on November 22, 2024 and sell it today you would earn a total of 432.00 from holding Direxion Daily FTSE or generate 18.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily FTSE vs. Franklin Electric Co
Performance |
| Timeline |
| Direxion Daily FTSE |
| Franklin Electric |
Direxion Daily and Franklin Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Franklin Electric
The main advantage of trading using opposite Direxion Daily and Franklin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Franklin Electric 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 Franklin Electric will offset losses from the drop in Franklin Electric's long position.| Direxion Daily vs. Direxion Daily South | Direxion Daily vs. Direxion Daily Mid | Direxion Daily vs. Direxion Daily MSCI | Direxion Daily vs. Direxion Daily MSCI |
| Franklin Electric vs. Graco Inc | Franklin Electric vs. Ametek Inc | Franklin Electric vs. Flowserve | Franklin Electric vs. Donaldson |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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