Correlation Between Knife River and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Knife River 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 Knife River and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knife River and Direxion Daily Cloud, you can compare the effects of market volatilities on Knife River 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 Knife River with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knife River and Direxion Daily.
Diversification Opportunities for Knife River and Direxion Daily
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Knife and Direxion is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Direxion Daily Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Cloud and Knife River 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 Knife River 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 Cloud has no effect on the direction of Knife River i.e., Knife River and Direxion Daily go up and down completely randomly.
Pair Corralation between Knife River and Direxion Daily
Considering the 90-day investment horizon Knife River is expected to generate 0.81 times more return on investment than Direxion Daily. However, Knife River is 1.23 times less risky than Direxion Daily. It trades about 0.13 of its potential returns per unit of risk. Direxion Daily Cloud is currently generating about 0.07 per unit of risk. If you would invest 3,551 in Knife River on September 1, 2024 and sell it today you would earn a total of 6,799 from holding Knife River or generate 191.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 83.52% |
| Values | Daily Returns |
Knife River vs. Direxion Daily Cloud
Performance |
| Timeline |
| Knife River |
| Direxion Daily Cloud |
Knife River and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knife River and Direxion Daily
The main advantage of trading using opposite Knife River and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River 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.| Knife River vs. Park Hotels Resorts | Knife River vs. The Wendys Co | Knife River vs. Dave Busters Entertainment | Knife River vs. Playa Hotels Resorts |
| Direxion Daily vs. Direxion Daily Travel | Direxion Daily vs. Direxion Daily Cnsmr | Direxion Daily vs. Direxion Daily Dow | Direxion Daily vs. Direxion Daily Industrials |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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