Correlation Between Direxion Daily and The Brown
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and The Brown 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 The Brown 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 The Brown Capital, you can compare the effects of market volatilities on Direxion Daily and The Brown 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 The Brown. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and The Brown.
Diversification Opportunities for Direxion Daily and The Brown
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and The is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and The Brown Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Capital 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 The Brown. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Capital has no effect on the direction of Direxion Daily i.e., Direxion Daily and The Brown go up and down completely randomly.
Pair Corralation between Direxion Daily and The Brown
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 2.8 times more return on investment than The Brown. However, Direxion Daily is 2.8 times more volatile than The Brown Capital. It trades about 0.05 of its potential returns per unit of risk. The Brown Capital is currently generating about 0.03 per unit of risk. If you would invest 3,781 in Direxion Daily Mid on September 4, 2024 and sell it today you would earn a total of 2,951 from holding Direxion Daily Mid or generate 78.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.13% |
| Values | Daily Returns |
Direxion Daily Mid vs. The Brown Capital
Performance |
| Timeline |
| Direxion Daily Mid |
| Brown Capital |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Direxion Daily and The Brown Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and The Brown
The main advantage of trading using opposite Direxion Daily and The Brown positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, The Brown 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 The Brown will offset losses from the drop in The Brown'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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