Correlation Between Direxion Daily and SPDR Portfolio

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Can any of the company-specific risk be diversified away by investing in both Direxion Daily and SPDR Portfolio 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 Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily NVDA and SPDR Portfolio Corporate, you can compare the effects of market volatilities on Direxion Daily and SPDR Portfolio 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 Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and SPDR Portfolio.

Diversification Opportunities for Direxion Daily and SPDR Portfolio

-0.82
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Direxion and SPDR is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and SPDR Portfolio Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Corporate 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 NVDA are associated (or correlated) with SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Corporate has no effect on the direction of Direxion Daily i.e., Direxion Daily and SPDR Portfolio go up and down completely randomly.

Pair Corralation between Direxion Daily and SPDR Portfolio

Given the investment horizon of 90 days Direxion Daily NVDA is expected to generate 13.69 times more return on investment than SPDR Portfolio. However, Direxion Daily is 13.69 times more volatile than SPDR Portfolio Corporate. It trades about 0.11 of its potential returns per unit of risk. SPDR Portfolio Corporate is currently generating about 0.07 per unit of risk. If you would invest  2,498  in Direxion Daily NVDA on September 12, 2024 and sell it today you would earn a total of  8,502  from holding Direxion Daily NVDA or generate 340.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy89.2%
ValuesDaily Returns

Direxion Daily NVDA  vs.  SPDR Portfolio Corporate

 Performance 
       Timeline  
Direxion Daily NVDA 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily NVDA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.
SPDR Portfolio Corporate 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SPDR Portfolio Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, SPDR Portfolio is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Direxion Daily and SPDR Portfolio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Direxion Daily and SPDR Portfolio

The main advantage of trading using opposite Direxion Daily and SPDR Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, SPDR Portfolio 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 Portfolio will offset losses from the drop in SPDR Portfolio's long position.
The idea behind Direxion Daily NVDA and SPDR Portfolio Corporate pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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