Correlation Between Direxion Daily and ETRACS Monthly
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and ETRACS Monthly 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 Monthly 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 Monthly Pay, you can compare the effects of market volatilities on Direxion Daily and ETRACS Monthly 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 Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and ETRACS Monthly.
Diversification Opportunities for Direxion Daily and ETRACS Monthly
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Direxion and ETRACS is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and ETRACS Monthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Monthly 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 Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Monthly Pay has no effect on the direction of Direxion Daily i.e., Direxion Daily and ETRACS Monthly go up and down completely randomly.
Pair Corralation between Direxion Daily and ETRACS Monthly
Given the investment horizon of 90 days Direxion Daily SP is expected to generate 2.29 times more return on investment than ETRACS Monthly. However, Direxion Daily is 2.29 times more volatile than ETRACS Monthly Pay. It trades about 0.02 of its potential returns per unit of risk. ETRACS Monthly Pay is currently generating about 0.02 per unit of risk. If you would invest 11,963 in Direxion Daily SP on September 14, 2024 and sell it today you would lose (1,773) from holding Direxion Daily SP or give up 14.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Direxion Daily SP vs. ETRACS Monthly Pay
Performance |
| Timeline |
| Direxion Daily SP |
| ETRACS Monthly Pay |
Direxion Daily and ETRACS Monthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and ETRACS Monthly
The main advantage of trading using opposite Direxion Daily and ETRACS Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, ETRACS Monthly 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 Monthly will offset losses from the drop in ETRACS Monthly'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 Monthly vs. ProShares Ultra SP500 | ETRACS Monthly vs. Direxion Daily SP | ETRACS Monthly vs. Direxion Daily SP | ETRACS Monthly vs. MicroSectors FANG Index |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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