Correlation Between American Beacon and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both American Beacon 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 American Beacon and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Beacon Select and Direxion Daily Regional, you can compare the effects of market volatilities on American Beacon 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 American Beacon with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Beacon and Direxion Daily.
Diversification Opportunities for American Beacon and Direxion Daily
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Direxion is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding American Beacon Select and Direxion Daily Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Regional and American Beacon 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 American Beacon Select 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 Regional has no effect on the direction of American Beacon i.e., American Beacon and Direxion Daily go up and down completely randomly.
Pair Corralation between American Beacon and Direxion Daily
Given the investment horizon of 90 days American Beacon is expected to generate 7.09 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, American Beacon Select is 7.44 times less risky than Direxion Daily. It trades about 0.23 of its potential returns per unit of risk. Direxion Daily Regional is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 11,332 in Direxion Daily Regional on August 28, 2024 and sell it today you would earn a total of 5,106 from holding Direxion Daily Regional or generate 45.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Beacon Select vs. Direxion Daily Regional
Performance |
| Timeline |
| American Beacon Select |
| Direxion Daily Regional |
American Beacon and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Beacon and Direxion Daily
The main advantage of trading using opposite American Beacon and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Beacon 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.| American Beacon vs. First Trust Exchange Traded | American Beacon vs. Ultimus Managers Trust | American Beacon vs. Horizon Kinetics Medical | American Beacon vs. Harbor Health Care |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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