Correlation Between Direxion Shares and Vanguard Index
Can any of the company-specific risk be diversified away by investing in both Direxion Shares and Vanguard Index 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 Shares and Vanguard Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Shares ETF and Vanguard Index Funds, you can compare the effects of market volatilities on Direxion Shares and Vanguard Index 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 Shares with a short position of Vanguard Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Shares and Vanguard Index.
Diversification Opportunities for Direxion Shares and Vanguard Index
-0.94 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Direxion and Vanguard is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Shares ETF and Vanguard Index Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Index Funds and Direxion Shares 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 Shares ETF are associated (or correlated) with Vanguard Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Index Funds has no effect on the direction of Direxion Shares i.e., Direxion Shares and Vanguard Index go up and down completely randomly.
Pair Corralation between Direxion Shares and Vanguard Index
Assuming the 90 days trading horizon Direxion Shares ETF is expected to under-perform the Vanguard Index. In addition to that, Direxion Shares is 3.23 times more volatile than Vanguard Index Funds. It trades about -0.35 of its total potential returns per unit of risk. Vanguard Index Funds is currently generating about 0.26 per unit of volatility. If you would invest 1,054,002 in Vanguard Index Funds on September 3, 2024 and sell it today you would earn a total of 75,162 from holding Vanguard Index Funds or generate 7.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Shares ETF vs. Vanguard Index Funds
Performance |
| Timeline |
| Direxion Shares ETF |
| Vanguard Index Funds |
Direxion Shares and Vanguard Index Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Shares and Vanguard Index
The main advantage of trading using opposite Direxion Shares and Vanguard Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Shares position performs unexpectedly, Vanguard Index 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 Vanguard Index will offset losses from the drop in Vanguard Index's long position.| Direxion Shares vs. Vanguard Index Funds | Direxion Shares vs. Vanguard Index Funds | Direxion Shares vs. Vanguard STAR Funds | Direxion Shares vs. SPDR SP 500 |
| Vanguard Index vs. Vanguard Funds Public | Vanguard Index vs. Vanguard Specialized Funds | Vanguard Index vs. Vanguard World | Vanguard Index vs. Vanguard Index Funds |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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