Correlation Between IShares Biotechnology and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both IShares Biotechnology 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 IShares Biotechnology and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Biotechnology ETF and Direxion Daily Regional, you can compare the effects of market volatilities on IShares Biotechnology 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 IShares Biotechnology with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Biotechnology and Direxion Daily.
Diversification Opportunities for IShares Biotechnology and Direxion Daily
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and Direxion is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding iShares Biotechnology ETF and Direxion Daily Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Regional and IShares Biotechnology 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 iShares Biotechnology ETF 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 Regional has no effect on the direction of IShares Biotechnology i.e., IShares Biotechnology and Direxion Daily go up and down completely randomly.
Pair Corralation between IShares Biotechnology and Direxion Daily
Considering the 90-day investment horizon iShares Biotechnology ETF is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, iShares Biotechnology ETF is 6.07 times less risky than Direxion Daily. The etf trades about -0.05 of its potential returns per unit of risk. The Direxion Daily Regional is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 11,332 in Direxion Daily Regional on August 28, 2024 and sell it today you would earn a total of 5,106 from holding Direxion Daily Regional or generate 45.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Biotechnology ETF vs. Direxion Daily Regional
Performance |
| Timeline |
| iShares Biotechnology ETF |
| Direxion Daily Regional |
IShares Biotechnology and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Biotechnology and Direxion Daily
The main advantage of trading using opposite IShares Biotechnology and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Biotechnology 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.| IShares Biotechnology vs. First Trust Exchange Traded | IShares Biotechnology vs. Ultimus Managers Trust | IShares Biotechnology vs. Horizon Kinetics Medical | IShares Biotechnology vs. Harbor Health Care |
| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Semiconductor |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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