Correlation Between MicroSectors FANG and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Direxion Daily 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 MicroSectors FANG and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and Direxion Daily SP, you can compare the effects of market volatilities on MicroSectors FANG and Direxion Daily 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 MicroSectors FANG with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Direxion Daily.
Diversification Opportunities for MicroSectors FANG and Direxion Daily
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between MicroSectors and Direxion is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and MicroSectors FANG 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 MicroSectors FANG Index are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily SP has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Direxion Daily go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Direxion Daily
Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, MicroSectors FANG Index is 1.35 times less risky than Direxion Daily. The etf trades about -0.08 of its potential returns per unit of risk. The Direxion Daily SP is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 12,500 in Direxion Daily SP on August 31, 2024 and sell it today you would earn a total of 180.00 from holding Direxion Daily SP or generate 1.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. Direxion Daily SP
Performance |
| Timeline |
| MicroSectors FANG Index |
| Direxion Daily SP |
MicroSectors FANG and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Direxion Daily
The main advantage of trading using opposite MicroSectors FANG and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Direxion Daily 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 Direxion Daily will offset losses from the drop in Direxion Daily's long position.| MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. Direxion Daily Technology | MicroSectors FANG vs. Direxion Daily SP |
| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Technology | Direxion Daily vs. Direxion Daily Small |
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 Stocks Directory module to find actively traded stocks across global markets.
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