Correlation Between Direxion Daily and American Beacon
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and American Beacon 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 American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Homebuilders and American Beacon Select, you can compare the effects of market volatilities on Direxion Daily and American Beacon 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 American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and American Beacon.
Diversification Opportunities for Direxion Daily and American Beacon
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and American is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Homebuilders and American Beacon Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Select 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 Homebuilders are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Select has no effect on the direction of Direxion Daily i.e., Direxion Daily and American Beacon go up and down completely randomly.
Pair Corralation between Direxion Daily and American Beacon
Given the investment horizon of 90 days Direxion Daily Homebuilders is expected to under-perform the American Beacon. In addition to that, Direxion Daily is 4.43 times more volatile than American Beacon Select. It trades about -0.08 of its total potential returns per unit of risk. American Beacon Select is currently generating about 0.14 per unit of volatility. If you would invest 3,090 in American Beacon Select on September 13, 2024 and sell it today you would earn a total of 89.00 from holding American Beacon Select or generate 2.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Direxion Daily Homebuilders vs. American Beacon Select
Performance |
| Timeline |
| Direxion Daily Homeb |
| American Beacon Select |
Direxion Daily and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and American Beacon
The main advantage of trading using opposite Direxion Daily and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.| Direxion Daily vs. Direxion Daily Regional | Direxion Daily vs. Direxion Daily Aerospace | Direxion Daily vs. Direxion Daily Retail | Direxion Daily vs. Direxion Daily Transportation |
| American Beacon vs. Columbia Emerging Markets | American Beacon vs. Direxion Daily Homebuilders | American Beacon vs. Direxion Daily Cnsmr | American Beacon vs. Fidelity MSCI Consumer |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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