Correlation Between Microsoft and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Microsoft and Direxion Daily 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 Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Direxion Daily FTSE, you can compare the effects of market volatilities on Microsoft and Direxion Daily 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 Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Direxion Daily.
Diversification Opportunities for Microsoft and Direxion Daily
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Direxion is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Direxion Daily FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily FTSE 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 Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily FTSE has no effect on the direction of Microsoft i.e., Microsoft and Direxion Daily go up and down completely randomly.
Pair Corralation between Microsoft and Direxion Daily
Given the investment horizon of 90 days Microsoft is expected to generate 0.4 times more return on investment than Direxion Daily. However, Microsoft is 2.5 times less risky than Direxion Daily. It trades about 0.19 of its potential returns per unit of risk. Direxion Daily FTSE is currently generating about -0.1 per unit of risk. If you would invest 40,554 in Microsoft on September 1, 2024 and sell it today you would earn a total of 1,792 from holding Microsoft or generate 4.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Direxion Daily FTSE
Performance |
| Timeline |
| Microsoft |
| Direxion Daily FTSE |
Microsoft and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Direxion Daily
The main advantage of trading using opposite Microsoft and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Direxion Daily 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 Daily will offset losses from the drop in Direxion Daily's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Direxion Daily vs. Direxion Daily South | Direxion Daily vs. Direxion Daily Mid | Direxion Daily vs. Direxion Daily MSCI | Direxion Daily vs. Direxion Daily MSCI |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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