Correlation Between Direxion Daily and Western Asset
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Western Asset 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 Western Asset 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 Western Asset California, you can compare the effects of market volatilities on Direxion Daily and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Western Asset.
Diversification Opportunities for Direxion Daily and Western Asset
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and Western is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Western Asset California in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset California 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset California has no effect on the direction of Direxion Daily i.e., Direxion Daily and Western Asset go up and down completely randomly.
Pair Corralation between Direxion Daily and Western Asset
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 11.46 times more return on investment than Western Asset. However, Direxion Daily is 11.46 times more volatile than Western Asset California. It trades about 0.32 of its potential returns per unit of risk. Western Asset California is currently generating about 0.19 per unit of risk. If you would invest 5,385 in Direxion Daily Mid on September 4, 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 | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Direxion Daily Mid vs. Western Asset California
Performance |
| Timeline |
| Direxion Daily Mid |
| Western Asset California |
Direxion Daily and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Western Asset
The main advantage of trading using opposite Direxion Daily and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset'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 |
| Western Asset vs. Clearbridge Aggressive Growth | Western Asset vs. Clearbridge Small Cap | Western Asset vs. Qs International Equity | Western Asset vs. Clearbridge Appreciation Fund |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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