Correlation Between Direxion Daily and GE Aerospace
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and GE Aerospace 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 GE Aerospace 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 GE Aerospace, you can compare the effects of market volatilities on Direxion Daily and GE Aerospace 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 GE Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and GE Aerospace.
Diversification Opportunities for Direxion Daily and GE Aerospace
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direxion and GE Aerospace is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily FTSE and GE Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Aerospace 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 GE Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Aerospace has no effect on the direction of Direxion Daily i.e., Direxion Daily and GE Aerospace go up and down completely randomly.
Pair Corralation between Direxion Daily and GE Aerospace
Given the investment horizon of 90 days Direxion Daily is expected to generate 2.7 times less return on investment than GE Aerospace. In addition to that, Direxion Daily is 1.46 times more volatile than GE Aerospace. It trades about 0.03 of its total potential returns per unit of risk. GE Aerospace is currently generating about 0.13 per unit of volatility. If you would invest 7,466 in GE Aerospace on November 27, 2024 and sell it today you would earn a total of 12,405 from holding GE Aerospace or generate 166.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily FTSE vs. GE Aerospace
Performance |
| Timeline |
| Direxion Daily FTSE |
| GE Aerospace |
Direxion Daily and GE Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and GE Aerospace
The main advantage of trading using opposite Direxion Daily and GE Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, GE Aerospace 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 GE Aerospace will offset losses from the drop in GE Aerospace'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 |
| GE Aerospace vs. Illinois Tool Works | GE Aerospace vs. Dover | GE Aerospace vs. Cummins | GE Aerospace vs. Eaton PLC |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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