Correlation Between Direxion Daily and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Johnson Johnson 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 Johnson Johnson 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 Johnson Johnson, you can compare the effects of market volatilities on Direxion Daily and Johnson Johnson 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 Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Johnson Johnson.
Diversification Opportunities for Direxion Daily and Johnson Johnson
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direxion and Johnson is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily FTSE and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson 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 Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Direxion Daily i.e., Direxion Daily and Johnson Johnson go up and down completely randomly.
Pair Corralation between Direxion Daily and Johnson Johnson
Given the investment horizon of 90 days Direxion Daily FTSE is expected to generate 2.68 times more return on investment than Johnson Johnson. However, Direxion Daily is 2.68 times more volatile than Johnson Johnson. It trades about 0.05 of its potential returns per unit of risk. Johnson Johnson is currently generating about 0.03 per unit of risk. If you would invest 1,710 in Direxion Daily FTSE on September 1, 2024 and sell it today you would earn a total of 558.00 from holding Direxion Daily FTSE or generate 32.63% 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. Johnson Johnson
Performance |
| Timeline |
| Direxion Daily FTSE |
| Johnson Johnson |
Direxion Daily and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Johnson Johnson
The main advantage of trading using opposite Direxion Daily and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson'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 |
| Johnson Johnson vs. Crinetics Pharmaceuticals | Johnson Johnson vs. Enanta Pharmaceuticals | Johnson Johnson vs. Amicus Therapeutics | Johnson Johnson vs. Connect Biopharma Holdings |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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