Correlation Between Direxion Daily and Inflation Protection
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Inflation Protection 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 Inflation Protection 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 Inflation Protection Fund, you can compare the effects of market volatilities on Direxion Daily and Inflation Protection 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 Inflation Protection. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Inflation Protection.
Diversification Opportunities for Direxion Daily and Inflation Protection
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Direxion and Inflation is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Inflation Protection Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protection 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 Inflation Protection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Protection has no effect on the direction of Direxion Daily i.e., Direxion Daily and Inflation Protection go up and down completely randomly.
Pair Corralation between Direxion Daily and Inflation Protection
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 8.74 times more return on investment than Inflation Protection. However, Direxion Daily is 8.74 times more volatile than Inflation Protection Fund. It trades about 0.07 of its potential returns per unit of risk. Inflation Protection Fund is currently generating about 0.03 per unit of risk. If you would invest 3,707 in Direxion Daily Mid on September 4, 2024 and sell it today you would earn a total of 3,025 from holding Direxion Daily Mid or generate 81.6% 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. Inflation Protection Fund
Performance |
| Timeline |
| Direxion Daily Mid |
| Inflation Protection |
Direxion Daily and Inflation Protection Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Inflation Protection
The main advantage of trading using opposite Direxion Daily and Inflation Protection positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Inflation Protection 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 Inflation Protection will offset losses from the drop in Inflation Protection'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 |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |