Correlation Between Direxion Daily and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Leverage Shares 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 Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Mid and Leverage Shares 3x, you can compare the effects of market volatilities on Direxion Daily and Leverage Shares 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 Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Leverage Shares.
Diversification Opportunities for Direxion Daily and Leverage Shares
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direxion and Leverage is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Leverage Shares 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 3x 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 Mid are associated (or correlated) with Leverage Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leverage Shares 3x has no effect on the direction of Direxion Daily i.e., Direxion Daily and Leverage Shares go up and down completely randomly.
Pair Corralation between Direxion Daily and Leverage Shares
Given the investment horizon of 90 days Direxion Daily is expected to generate 9.81 times less return on investment than Leverage Shares. But when comparing it to its historical volatility, Direxion Daily Mid is 4.84 times less risky than Leverage Shares. It trades about 0.06 of its potential returns per unit of risk. Leverage Shares 3x is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,794 in Leverage Shares 3x on September 12, 2024 and sell it today you would earn a total of 57,793 from holding Leverage Shares 3x or generate 1523.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 86.86% |
| Values | Daily Returns |
Direxion Daily Mid vs. Leverage Shares 3x
Performance |
| Timeline |
| Direxion Daily Mid |
| Leverage Shares 3x |
Direxion Daily and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Leverage Shares
The main advantage of trading using opposite Direxion Daily and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Leverage Shares 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 Leverage Shares will offset losses from the drop in Leverage Shares' long position.| Direxion Daily vs. Direxion Daily Retail | Direxion Daily vs. Direxion Daily Industrials | Direxion Daily vs. Direxion Daily Transportation | Direxion Daily vs. Direxion Daily FTSE |
| Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 2x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x |
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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