Correlation Between Direxion Daily and 2x Long
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and 2x Long 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 2x Long 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 2x Long VIX, you can compare the effects of market volatilities on Direxion Daily and 2x Long 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 2x Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and 2x Long.
Diversification Opportunities for Direxion Daily and 2x Long
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and UVIX is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and 2x Long VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 2x Long VIX 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 2x Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 2x Long VIX has no effect on the direction of Direxion Daily i.e., Direxion Daily and 2x Long go up and down completely randomly.
Pair Corralation between Direxion Daily and 2x Long
Given the investment horizon of 90 days Direxion Daily NVDA is expected to generate 0.68 times more return on investment than 2x Long. However, Direxion Daily NVDA is 1.47 times less risky than 2x Long. It trades about 0.12 of its potential returns per unit of risk. 2x Long VIX is currently generating about -0.07 per unit of risk. If you would invest 2,498 in Direxion Daily NVDA on September 2, 2024 and sell it today you would earn a total of 9,115 from holding Direxion Daily NVDA or generate 364.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 62.1% |
| Values | Daily Returns |
Direxion Daily NVDA vs. 2x Long VIX
Performance |
| Timeline |
| Direxion Daily NVDA |
| 2x Long VIX |
Direxion Daily and 2x Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and 2x Long
The main advantage of trading using opposite Direxion Daily and 2x Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, 2x Long 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 2x Long will offset losses from the drop in 2x Long's long position.| Direxion Daily vs. Tidal Trust II | Direxion Daily vs. Tidal Trust II | Direxion Daily vs. Direxion Daily META | Direxion Daily vs. Direxion Daily META |
| 2x Long vs. 1x Short VIX | 2x Long vs. ProShares UltraShort Bloomberg | 2x Long vs. MicroSectors FANG Index | 2x Long vs. AXS TSLA Bear |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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