Correlation Between Direxion Daily and PIMCO Emerging

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Can any of the company-specific risk be diversified away by investing in both Direxion Daily and PIMCO Emerging 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 PIMCO Emerging 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 PIMCO Emerging Markets, you can compare the effects of market volatilities on Direxion Daily and PIMCO Emerging 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 PIMCO Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and PIMCO Emerging.

Diversification Opportunities for Direxion Daily and PIMCO Emerging

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Direxion and PIMCO is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and PIMCO Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO Emerging Markets 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 PIMCO Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO Emerging Markets has no effect on the direction of Direxion Daily i.e., Direxion Daily and PIMCO Emerging go up and down completely randomly.

Pair Corralation between Direxion Daily and PIMCO Emerging

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 7.13 times more return on investment than PIMCO Emerging. However, Direxion Daily is 7.13 times more volatile than PIMCO Emerging Markets. It trades about 0.19 of its potential returns per unit of risk. PIMCO Emerging Markets is currently generating about -0.12 per unit of risk. If you would invest  4,829  in Direxion Daily Mid on September 5, 2024 and sell it today you would earn a total of  1,791  from holding Direxion Daily Mid or generate 37.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy98.46%
ValuesDaily Returns

Direxion Daily Mid  vs.  PIMCO Emerging Markets

 Performance 
       Timeline  
Direxion Daily Mid 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.
PIMCO Emerging Markets 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PIMCO Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PIMCO Emerging is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Direxion Daily and PIMCO Emerging Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Direxion Daily and PIMCO Emerging

The main advantage of trading using opposite Direxion Daily and PIMCO Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, PIMCO Emerging 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 PIMCO Emerging will offset losses from the drop in PIMCO Emerging's long position.
The idea behind Direxion Daily Mid and PIMCO Emerging Markets 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.
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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