Correlation Between Direxion Daily and SPDR Gold
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and SPDR Gold 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 SPDR Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Gold and SPDR Gold Shares, you can compare the effects of market volatilities on Direxion Daily and SPDR Gold 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 SPDR Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and SPDR Gold.
Diversification Opportunities for Direxion Daily and SPDR Gold
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and SPDR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Gold and SPDR Gold Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Shares 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 Gold are associated (or correlated) with SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold Shares has no effect on the direction of Direxion Daily i.e., Direxion Daily and SPDR Gold go up and down completely randomly.
Pair Corralation between Direxion Daily and SPDR Gold
Given the investment horizon of 90 days Direxion Daily Gold is expected to under-perform the SPDR Gold. In addition to that, Direxion Daily is 3.28 times more volatile than SPDR Gold Shares. It trades about -0.23 of its total potential returns per unit of risk. SPDR Gold Shares is currently generating about -0.16 per unit of volatility. If you would invest 25,609 in SPDR Gold Shares on August 30, 2024 and sell it today you would lose (1,260) from holding SPDR Gold Shares or give up 4.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Gold vs. SPDR Gold Shares
Performance |
| Timeline |
| Direxion Daily Gold |
| SPDR Gold Shares |
Direxion Daily and SPDR Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and SPDR Gold
The main advantage of trading using opposite Direxion Daily and SPDR Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, SPDR Gold 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 SPDR Gold will offset losses from the drop in SPDR Gold's long position.| Direxion Daily vs. Direxion Daily Gold | Direxion Daily vs. Direxion Daily Junior | Direxion Daily vs. Direxion Daily Junior | Direxion Daily vs. VanEck Gold Miners |
| SPDR Gold vs. iShares Silver Trust | SPDR Gold vs. VanEck Gold Miners | SPDR Gold vs. SPDR SP 500 | SPDR Gold vs. United States Oil |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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