Correlation Between Direxion Daily and Prudential Core
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Prudential Core 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 Prudential Core 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 Prudential E Bond, you can compare the effects of market volatilities on Direxion Daily and Prudential Core 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 Prudential Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Prudential Core.
Diversification Opportunities for Direxion Daily and Prudential Core
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Direxion and Prudential is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Prudential E Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential E Bond 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 Prudential Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential E Bond has no effect on the direction of Direxion Daily i.e., Direxion Daily and Prudential Core go up and down completely randomly.
Pair Corralation between Direxion Daily and Prudential Core
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 9.9 times more return on investment than Prudential Core. However, Direxion Daily is 9.9 times more volatile than Prudential E Bond. It trades about 0.32 of its potential returns per unit of risk. Prudential E Bond is currently generating about 0.12 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Mid vs. Prudential E Bond
Performance |
| Timeline |
| Direxion Daily Mid |
| Prudential E Bond |
Direxion Daily and Prudential Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Prudential Core
The main advantage of trading using opposite Direxion Daily and Prudential Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Prudential Core 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 Prudential Core will offset losses from the drop in Prudential Core'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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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