Correlation Between Direxion Daily and London Stock
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and London Stock 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 London Stock 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 London Stock Exchange, you can compare the effects of market volatilities on Direxion Daily and London Stock 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 London Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and London Stock.
Diversification Opportunities for Direxion Daily and London Stock
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and London is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and London Stock Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Stock Exchange 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 London Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Stock Exchange has no effect on the direction of Direxion Daily i.e., Direxion Daily and London Stock go up and down completely randomly.
Pair Corralation between Direxion Daily and London Stock
Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the London Stock. In addition to that, Direxion Daily is 1.56 times more volatile than London Stock Exchange. It trades about -0.07 of its total potential returns per unit of risk. London Stock Exchange is currently generating about 0.05 per unit of volatility. If you would invest 13,300 in London Stock Exchange on September 12, 2024 and sell it today you would earn a total of 200.00 from holding London Stock Exchange or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Direxion Daily Mid vs. London Stock Exchange
Performance |
| Timeline |
| Direxion Daily Mid |
| London Stock Exchange |
Direxion Daily and London Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and London Stock
The main advantage of trading using opposite Direxion Daily and London Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, London Stock 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 London Stock will offset losses from the drop in London Stock'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 |
| London Stock vs. SMA Solar Technology | London Stock vs. Highlight Communications AG | London Stock vs. Ribbon Communications | London Stock vs. Singapore Telecommunications Limited |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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