Correlation Between ETRACS 2x and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both ETRACS 2x 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 ETRACS 2x and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS 2x Leveraged and Direxion Daily SP, you can compare the effects of market volatilities on ETRACS 2x 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 ETRACS 2x with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2x and Direxion Daily.
Diversification Opportunities for ETRACS 2x and Direxion Daily
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ETRACS and Direxion is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2x Leveraged 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 ETRACS 2x 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 ETRACS 2x Leveraged 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 ETRACS 2x i.e., ETRACS 2x and Direxion Daily go up and down completely randomly.
Pair Corralation between ETRACS 2x and Direxion Daily
Given the investment horizon of 90 days ETRACS 2x Leveraged is expected to generate 0.44 times more return on investment than Direxion Daily. However, ETRACS 2x Leveraged is 2.25 times less risky than Direxion Daily. It trades about 0.1 of its potential returns per unit of risk. Direxion Daily SP is currently generating about -0.02 per unit of risk. If you would invest 1,763 in ETRACS 2x Leveraged on August 30, 2024 and sell it today you would earn a total of 2,943 from holding ETRACS 2x Leveraged or generate 166.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
ETRACS 2x Leveraged vs. Direxion Daily SP
Performance |
| Timeline |
| ETRACS 2x Leveraged |
| Direxion Daily SP |
ETRACS 2x and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS 2x and Direxion Daily
The main advantage of trading using opposite ETRACS 2x and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2x 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.| ETRACS 2x vs. ABIVAX Socit Anonyme | ETRACS 2x vs. Morningstar Unconstrained Allocation | ETRACS 2x vs. SPACE | ETRACS 2x vs. Knife River |
| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Technology | Direxion Daily vs. Direxion Daily SP |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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