Correlation Between Direxion Daily and Smead International
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Smead International 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 Smead International 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 Smead International Value, you can compare the effects of market volatilities on Direxion Daily and Smead International 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 Smead International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Smead International.
Diversification Opportunities for Direxion Daily and Smead International
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and Smead is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Smead International Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smead International Value 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 Smead International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smead International Value has no effect on the direction of Direxion Daily i.e., Direxion Daily and Smead International go up and down completely randomly.
Pair Corralation between Direxion Daily and Smead International
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 3.1 times more return on investment than Smead International. However, Direxion Daily is 3.1 times more volatile than Smead International Value. It trades about 0.09 of its potential returns per unit of risk. Smead International Value is currently generating about 0.03 per unit of risk. If you would invest 3,315 in Direxion Daily Mid on September 4, 2024 and sell it today you would earn a total of 3,417 from holding Direxion Daily Mid or generate 103.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.66% |
| Values | Daily Returns |
Direxion Daily Mid vs. Smead International Value
Performance |
| Timeline |
| Direxion Daily Mid |
| Smead International Value |
Direxion Daily and Smead International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Smead International
The main advantage of trading using opposite Direxion Daily and Smead International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Smead International 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 Smead International will offset losses from the drop in Smead International'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 |
| Smead International vs. Legg Mason Partners | Smead International vs. The Hartford Emerging | Smead International vs. Transamerica Emerging Markets | Smead International vs. Massmutual Select Diversified |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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