Correlation Between Direxion Daily and Franklin LibertyQ
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Franklin LibertyQ 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 Franklin LibertyQ 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 Franklin LibertyQ Mid, you can compare the effects of market volatilities on Direxion Daily and Franklin LibertyQ 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 Franklin LibertyQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Franklin LibertyQ.
Diversification Opportunities for Direxion Daily and Franklin LibertyQ
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Direxion and Franklin is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Franklin LibertyQ Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin LibertyQ Mid 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 Franklin LibertyQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin LibertyQ Mid has no effect on the direction of Direxion Daily i.e., Direxion Daily and Franklin LibertyQ go up and down completely randomly.
Pair Corralation between Direxion Daily and Franklin LibertyQ
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 4.12 times more return on investment than Franklin LibertyQ. However, Direxion Daily is 4.12 times more volatile than Franklin LibertyQ Mid. It trades about 0.3 of its potential returns per unit of risk. Franklin LibertyQ Mid is currently generating about 0.34 per unit of risk. If you would invest 5,543 in Direxion Daily Mid on August 28, 2024 and sell it today you would earn a total of 1,352 from holding Direxion Daily Mid or generate 24.39% 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. Franklin LibertyQ Mid
Performance |
| Timeline |
| Direxion Daily Mid |
| Franklin LibertyQ Mid |
Direxion Daily and Franklin LibertyQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Franklin LibertyQ
The main advantage of trading using opposite Direxion Daily and Franklin LibertyQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Franklin LibertyQ 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 Franklin LibertyQ will offset losses from the drop in Franklin LibertyQ's long position.| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Semiconductor |
| Franklin LibertyQ vs. Vanguard Mid Cap Index | Franklin LibertyQ vs. iShares Core SP | Franklin LibertyQ vs. SPDR SP MIDCAP | Franklin LibertyQ vs. First Trust Dorsey |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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