Correlation Between DBX ETF and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both DBX ETF 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 DBX ETF and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DBX ETF Trust and Direxion Daily Mid, you can compare the effects of market volatilities on DBX ETF 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 DBX ETF with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of DBX ETF and Direxion Daily.
Diversification Opportunities for DBX ETF and Direxion Daily
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between DBX and Direxion is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding DBX ETF Trust and Direxion Daily Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Mid and DBX ETF 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 DBX ETF Trust 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 Mid has no effect on the direction of DBX ETF i.e., DBX ETF and Direxion Daily go up and down completely randomly.
Pair Corralation between DBX ETF and Direxion Daily
Given the investment horizon of 90 days DBX ETF is expected to generate 2.34 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, DBX ETF Trust is 2.96 times less risky than Direxion Daily. It trades about 0.04 of its potential returns per unit of risk. Direxion Daily Mid is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,473 in Direxion Daily Mid on November 5, 2024 and sell it today you would earn a total of 1,335 from holding Direxion Daily Mid or generate 29.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
DBX ETF Trust vs. Direxion Daily Mid
Performance |
| Timeline |
| DBX ETF Trust |
| Direxion Daily Mid |
DBX ETF and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DBX ETF and Direxion Daily
The main advantage of trading using opposite DBX ETF and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DBX ETF 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.The idea behind DBX ETF Trust and Direxion Daily Mid pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Direxion Daily vs. Direxion Daily Retail | Direxion Daily vs. Direxion Daily Industrials | Direxion Daily vs. Direxion Daily Transportation | Direxion Daily vs. Direxion Daily FTSE |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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