Correlation Between Microsoft and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both Microsoft and Direxion Shares 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 Microsoft and Direxion Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Direxion Shares ETF, you can compare the effects of market volatilities on Microsoft and Direxion Shares 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 Microsoft with a short position of Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Direxion Shares.
Diversification Opportunities for Microsoft and Direxion Shares
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Direxion is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF and Microsoft 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 Microsoft are associated (or correlated) with Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of Microsoft i.e., Microsoft and Direxion Shares go up and down completely randomly.
Pair Corralation between Microsoft and Direxion Shares
Given the investment horizon of 90 days Microsoft is expected to generate 0.49 times more return on investment than Direxion Shares. However, Microsoft is 2.04 times less risky than Direxion Shares. It trades about 0.08 of its potential returns per unit of risk. Direxion Shares ETF is currently generating about -0.09 per unit of risk. If you would invest 24,921 in Microsoft on November 9, 2024 and sell it today you would earn a total of 16,661 from holding Microsoft or generate 66.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 37.12% |
| Values | Daily Returns |
Microsoft vs. Direxion Shares ETF
Performance |
| Timeline |
| Microsoft |
| Direxion Shares ETF |
Microsoft and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Direxion Shares
The main advantage of trading using opposite Microsoft and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Direxion Shares 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 Direxion Shares will offset losses from the drop in Direxion Shares' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Direxion Shares vs. Freedom Day Dividend | Direxion Shares vs. Franklin Templeton ETF | Direxion Shares vs. iShares MSCI China | Direxion Shares vs. Tidal Trust II |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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