Correlation Between Pacer Solactive and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Pacer Solactive 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 Pacer Solactive and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacer Solactive Whitney and Direxion Daily Industrials, you can compare the effects of market volatilities on Pacer Solactive 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 Pacer Solactive with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacer Solactive and Direxion Daily.
Diversification Opportunities for Pacer Solactive and Direxion Daily
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pacer and Direxion is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Pacer Solactive Whitney and Direxion Daily Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Indus and Pacer Solactive 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 Pacer Solactive Whitney 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 Indus has no effect on the direction of Pacer Solactive i.e., Pacer Solactive and Direxion Daily go up and down completely randomly.
Pair Corralation between Pacer Solactive and Direxion Daily
Given the investment horizon of 90 days Pacer Solactive is expected to generate 4.05 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Pacer Solactive Whitney is 3.27 times less risky than Direxion Daily. It trades about 0.24 of its potential returns per unit of risk. Direxion Daily Industrials is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 5,435 in Direxion Daily Industrials on November 3, 2024 and sell it today you would earn a total of 970.00 from holding Direxion Daily Industrials or generate 17.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pacer Solactive Whitney vs. Direxion Daily Industrials
Performance |
| Timeline |
| Pacer Solactive Whitney |
| Direxion Daily Indus |
Pacer Solactive and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacer Solactive and Direxion Daily
The main advantage of trading using opposite Pacer Solactive and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacer Solactive 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.| Pacer Solactive vs. Ultimus Managers Trust | Pacer Solactive vs. American Beacon Select | Pacer Solactive vs. First Trust Indxx | Pacer Solactive vs. Direxion Daily SP |
| Direxion Daily vs. Direxion Daily Transportation | Direxion Daily vs. Direxion Daily Utilities | Direxion Daily vs. Direxion Daily Cnsmr | Direxion Daily vs. Direxion Daily Retail |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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