Correlation Between Direxion Daily and ARCA Gold
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and ARCA Gold 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 ARCA Gold 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 ARCA Gold BUGS, you can compare the effects of market volatilities on Direxion Daily and ARCA Gold 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 ARCA Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and ARCA Gold.
Diversification Opportunities for Direxion Daily and ARCA Gold
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and ARCA is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and ARCA Gold BUGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARCA Gold BUGS 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 ARCA Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARCA Gold BUGS has no effect on the direction of Direxion Daily i.e., Direxion Daily and ARCA Gold go up and down completely randomly.
Pair Corralation between Direxion Daily and ARCA Gold
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 1.58 times more return on investment than ARCA Gold. However, Direxion Daily is 1.58 times more volatile than ARCA Gold BUGS. It trades about 0.29 of its potential returns per unit of risk. ARCA Gold BUGS is currently generating about -0.07 per unit of risk. If you would invest 5,385 in Direxion Daily Mid on September 4, 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Mid vs. ARCA Gold BUGS
Performance |
| Timeline |
Direxion Daily and ARCA Gold Volatility Contrast
Predicted Return Density |
| Returns |
Direxion Daily Mid
Pair trading matchups for Direxion Daily
ARCA Gold BUGS
Pair trading matchups for ARCA Gold
Pair Trading with Direxion Daily and ARCA Gold
The main advantage of trading using opposite Direxion Daily and ARCA Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, ARCA Gold 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 ARCA Gold will offset losses from the drop in ARCA Gold'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 |
| ARCA Gold vs. Jacobs Solutions | ARCA Gold vs. Chester Mining | ARCA Gold vs. Sealed Air | ARCA Gold vs. Hawkins |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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