Correlation Between IShares MSCI and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 MSCI 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 MSCI China and Direxion Daily MSCI, you can compare the effects of market volatilities on IShares MSCI 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 MSCI with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Direxion Daily.
Diversification Opportunities for IShares MSCI and Direxion Daily
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Direxion is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and Direxion Daily MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily MSCI and IShares MSCI 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 MSCI China 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 MSCI has no effect on the direction of IShares MSCI i.e., IShares MSCI and Direxion Daily go up and down completely randomly.
Pair Corralation between IShares MSCI and Direxion Daily
Given the investment horizon of 90 days IShares MSCI is expected to generate 1.12 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, iShares MSCI China is 1.4 times less risky than Direxion Daily. It trades about 0.32 of its potential returns per unit of risk. Direxion Daily MSCI is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,907 in Direxion Daily MSCI on November 27, 2024 and sell it today you would earn a total of 391.00 from holding Direxion Daily MSCI or generate 13.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI China vs. Direxion Daily MSCI
Performance |
| Timeline |
| iShares MSCI China |
| Direxion Daily MSCI |
IShares MSCI and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Direxion Daily
The main advantage of trading using opposite IShares MSCI and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 MSCI vs. KraneShares CSI China | IShares MSCI vs. Invesco China Technology | IShares MSCI vs. iShares MSCI India | IShares MSCI vs. Xtrackers Harvest CSI |
| Direxion Daily vs. Strategy Shares | Direxion Daily vs. Freedom Day Dividend | Direxion Daily vs. Franklin Templeton ETF | Direxion Daily vs. iShares MSCI China |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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