Correlation Between Direxion Daily and AdvisorShares Restaurant
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and AdvisorShares Restaurant 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 AdvisorShares Restaurant 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 AdvisorShares Restaurant ETF, you can compare the effects of market volatilities on Direxion Daily and AdvisorShares Restaurant 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 AdvisorShares Restaurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and AdvisorShares Restaurant.
Diversification Opportunities for Direxion Daily and AdvisorShares Restaurant
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Direxion and AdvisorShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and AdvisorShares Restaurant ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Restaurant 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 AdvisorShares Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Restaurant has no effect on the direction of Direxion Daily i.e., Direxion Daily and AdvisorShares Restaurant go up and down completely randomly.
Pair Corralation between Direxion Daily and AdvisorShares Restaurant
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 2.73 times more return on investment than AdvisorShares Restaurant. However, Direxion Daily is 2.73 times more volatile than AdvisorShares Restaurant ETF. It trades about 0.28 of its potential returns per unit of risk. AdvisorShares Restaurant ETF is currently generating about 0.33 per unit of risk. If you would invest 5,385 in Direxion Daily Mid on September 5, 2024 and sell it today you would earn a total of 1,235 from holding Direxion Daily Mid or generate 22.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Mid vs. AdvisorShares Restaurant ETF
Performance |
| Timeline |
| Direxion Daily Mid |
| AdvisorShares Restaurant |
Direxion Daily and AdvisorShares Restaurant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and AdvisorShares Restaurant
The main advantage of trading using opposite Direxion Daily and AdvisorShares Restaurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, AdvisorShares Restaurant 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 AdvisorShares Restaurant will offset losses from the drop in AdvisorShares Restaurant'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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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