Correlation Between Direxion Daily and Pimco Emerging
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Pimco Emerging 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 Pimco Emerging 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 Pimco Emerging Local, you can compare the effects of market volatilities on Direxion Daily and Pimco Emerging 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 Pimco Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Pimco Emerging.
Diversification Opportunities for Direxion Daily and Pimco Emerging
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Direxion and Pimco is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Pimco Emerging Local in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Emerging Local 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 Pimco Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Emerging Local has no effect on the direction of Direxion Daily i.e., Direxion Daily and Pimco Emerging go up and down completely randomly.
Pair Corralation between Direxion Daily and Pimco Emerging
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 7.28 times more return on investment than Pimco Emerging. However, Direxion Daily is 7.28 times more volatile than Pimco Emerging Local. It trades about 0.32 of its potential returns per unit of risk. Pimco Emerging Local is currently generating about -0.1 per unit of risk. If you would invest 5,385 in Direxion Daily Mid on September 3, 2024 and sell it today you would earn a total of 1,347 from holding Direxion Daily Mid or generate 25.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Mid vs. Pimco Emerging Local
Performance |
| Timeline |
| Direxion Daily Mid |
| Pimco Emerging Local |
Direxion Daily and Pimco Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Pimco Emerging
The main advantage of trading using opposite Direxion Daily and Pimco Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Pimco Emerging 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 Pimco Emerging will offset losses from the drop in Pimco Emerging'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 |
| Pimco Emerging vs. Siit Ultra Short | Pimco Emerging vs. Astor Longshort Fund | Pimco Emerging vs. Limited Term Tax | Pimco Emerging vs. Quantitative Longshort Equity |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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