Correlation Between Direxion Daily and Ladenburg Thalmann

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Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Ladenburg Thalmann 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 Ladenburg Thalmann 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 Ladenburg Thalmann Financial, you can compare the effects of market volatilities on Direxion Daily and Ladenburg Thalmann 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 Ladenburg Thalmann. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Ladenburg Thalmann.

Diversification Opportunities for Direxion Daily and Ladenburg Thalmann

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Direxion and Ladenburg is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Ladenburg Thalmann Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ladenburg Thalmann 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 Ladenburg Thalmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ladenburg Thalmann has no effect on the direction of Direxion Daily i.e., Direxion Daily and Ladenburg Thalmann go up and down completely randomly.

Pair Corralation between Direxion Daily and Ladenburg Thalmann

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 0.77 times more return on investment than Ladenburg Thalmann. However, Direxion Daily Mid is 1.29 times less risky than Ladenburg Thalmann. It trades about 0.05 of its potential returns per unit of risk. Ladenburg Thalmann Financial is currently generating about 0.02 per unit of risk. If you would invest  3,403  in Direxion Daily Mid on September 12, 2024 and sell it today you would earn a total of  2,865  from holding Direxion Daily Mid or generate 84.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy29.09%
ValuesDaily Returns

Direxion Daily Mid  vs.  Ladenburg Thalmann Financial

 Performance 
       Timeline  
Direxion Daily Mid 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.
Ladenburg Thalmann 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ladenburg Thalmann Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Ladenburg Thalmann is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Direxion Daily and Ladenburg Thalmann Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Direxion Daily and Ladenburg Thalmann

The main advantage of trading using opposite Direxion Daily and Ladenburg Thalmann positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Ladenburg Thalmann 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 Ladenburg Thalmann will offset losses from the drop in Ladenburg Thalmann's long position.
The idea behind Direxion Daily Mid and Ladenburg Thalmann Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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