Correlation Between Direxion Daily and ETRACS Quarterly
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and ETRACS Quarterly 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 Direxion Daily and ETRACS Quarterly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily SP and ETRACS Quarterly Pay, you can compare the effects of market volatilities on Direxion Daily and ETRACS Quarterly 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 Direxion Daily with a short position of ETRACS Quarterly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and ETRACS Quarterly.
Diversification Opportunities for Direxion Daily and ETRACS Quarterly
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and ETRACS is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and ETRACS Quarterly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Quarterly Pay and Direxion Daily 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 Direxion Daily SP are associated (or correlated) with ETRACS Quarterly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Quarterly Pay has no effect on the direction of Direxion Daily i.e., Direxion Daily and ETRACS Quarterly go up and down completely randomly.
Pair Corralation between Direxion Daily and ETRACS Quarterly
Given the investment horizon of 90 days Direxion Daily SP is expected to generate 3.61 times more return on investment than ETRACS Quarterly. However, Direxion Daily is 3.61 times more volatile than ETRACS Quarterly Pay. It trades about 0.04 of its potential returns per unit of risk. ETRACS Quarterly Pay is currently generating about 0.01 per unit of risk. If you would invest 11,103 in Direxion Daily SP on August 31, 2024 and sell it today you would earn a total of 1,450 from holding Direxion Daily SP or generate 13.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily SP vs. ETRACS Quarterly Pay
Performance |
| Timeline |
| Direxion Daily SP |
| ETRACS Quarterly Pay |
Direxion Daily and ETRACS Quarterly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and ETRACS Quarterly
The main advantage of trading using opposite Direxion Daily and ETRACS Quarterly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, ETRACS Quarterly 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 ETRACS Quarterly will offset losses from the drop in ETRACS Quarterly's long position.| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Technology | Direxion Daily vs. Direxion Daily Small |
| ETRACS Quarterly vs. ETRACS Monthly Pay | ETRACS Quarterly vs. ETRACS Monthly Pay | ETRACS Quarterly vs. ETRACS Monthly Pay | ETRACS Quarterly vs. iShares Trust |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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