Correlation Between Direxion Daily and GMO Internet
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and GMO Internet 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 GMO Internet 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 GMO Internet, you can compare the effects of market volatilities on Direxion Daily and GMO Internet 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 GMO Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and GMO Internet.
Diversification Opportunities for Direxion Daily and GMO Internet
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Direxion and GMO is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily FTSE and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet 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 GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Direxion Daily i.e., Direxion Daily and GMO Internet go up and down completely randomly.
Pair Corralation between Direxion Daily and GMO Internet
Given the investment horizon of 90 days Direxion Daily FTSE is expected to under-perform the GMO Internet. In addition to that, Direxion Daily is 1.15 times more volatile than GMO Internet. It trades about -0.1 of its total potential returns per unit of risk. GMO Internet is currently generating about -0.05 per unit of volatility. If you would invest 1,690 in GMO Internet on September 1, 2024 and sell it today you would lose (51.00) from holding GMO Internet or give up 3.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily FTSE vs. GMO Internet
Performance |
| Timeline |
| Direxion Daily FTSE |
| GMO Internet |
Direxion Daily and GMO Internet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and GMO Internet
The main advantage of trading using opposite Direxion Daily and GMO Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, GMO Internet 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 GMO Internet will offset losses from the drop in GMO Internet'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 |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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