Correlation Between Direxion Daily and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Legg Mason 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 Legg Mason 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 Legg Mason Bw, you can compare the effects of market volatilities on Direxion Daily and Legg Mason 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 Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Legg Mason.
Diversification Opportunities for Direxion Daily and Legg Mason
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Direxion and Legg is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Legg Mason Bw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Bw 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 Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Bw has no effect on the direction of Direxion Daily i.e., Direxion Daily and Legg Mason go up and down completely randomly.
Pair Corralation between Direxion Daily and Legg Mason
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 4.0 times more return on investment than Legg Mason. However, Direxion Daily is 4.0 times more volatile than Legg Mason Bw. It trades about 0.08 of its potential returns per unit of risk. Legg Mason Bw is currently generating about 0.15 per unit of risk. If you would invest 5,078 in Direxion Daily Mid on September 3, 2024 and sell it today you would earn a total of 1,654 from holding Direxion Daily Mid or generate 32.57% 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. Legg Mason Bw
Performance |
| Timeline |
| Direxion Daily Mid |
| Legg Mason Bw |
Direxion Daily and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Legg Mason
The main advantage of trading using opposite Direxion Daily and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason'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 |
| Legg Mason vs. Vanguard Value Index | Legg Mason vs. Dodge Cox Stock | Legg Mason vs. American Funds American | Legg Mason vs. American Funds American |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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