Correlation Between Direxion Daily and Aave
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Aave 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 Aave 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 Aave, you can compare the effects of market volatilities on Direxion Daily and Aave 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 Aave. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Aave.
Diversification Opportunities for Direxion Daily and Aave
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and Aave is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Aave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aave 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 Aave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aave has no effect on the direction of Direxion Daily i.e., Direxion Daily and Aave go up and down completely randomly.
Pair Corralation between Direxion Daily and Aave
Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Aave. But the etf apears to be less risky and, when comparing its historical volatility, Direxion Daily Mid is 2.7 times less risky than Aave. The etf trades about -0.07 of its potential returns per unit of risk. The Aave is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 17,961 in Aave on September 12, 2024 and sell it today you would earn a total of 11,759 from holding Aave or generate 65.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Direxion Daily Mid vs. Aave
Performance |
| Timeline |
| Direxion Daily Mid |
| Aave |
Direxion Daily and Aave Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Aave
The main advantage of trading using opposite Direxion Daily and Aave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Aave 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 Aave will offset losses from the drop in Aave's 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 |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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