Correlation Between Direxion Daily and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and IShares Trust 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 IShares Trust 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 iShares Trust, you can compare the effects of market volatilities on Direxion Daily and IShares Trust 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 IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and IShares Trust.
Diversification Opportunities for Direxion Daily and IShares Trust
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and IShares is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Direxion Daily i.e., Direxion Daily and IShares Trust go up and down completely randomly.
Pair Corralation between Direxion Daily and IShares Trust
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 9.11 times more return on investment than IShares Trust. However, Direxion Daily is 9.11 times more volatile than iShares Trust. It trades about 0.28 of its potential returns per unit of risk. iShares Trust is currently generating about 0.29 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 Against |
| Strength | Very Weak |
| Accuracy | 72.73% |
| Values | Daily Returns |
Direxion Daily Mid vs. iShares Trust
Performance |
| Timeline |
| Direxion Daily Mid |
| iShares Trust |
Direxion Daily and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and IShares Trust
The main advantage of trading using opposite Direxion Daily and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, IShares Trust 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 IShares Trust will offset losses from the drop in IShares Trust'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 |
| IShares Trust vs. Vanguard Total Stock | IShares Trust vs. SPDR SP 500 | IShares Trust vs. Vanguard Total Bond | IShares Trust vs. Vanguard Value Index |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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