Correlation Between NYSE Composite and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Direxion Shares 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 NYSE Composite and Direxion Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Direxion Shares ETF, you can compare the effects of market volatilities on NYSE Composite and Direxion Shares 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 NYSE Composite with a short position of Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Direxion Shares.
Diversification Opportunities for NYSE Composite and Direxion Shares
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Direxion is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF and NYSE Composite 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 NYSE Composite are associated (or correlated) with Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of NYSE Composite i.e., NYSE Composite and Direxion Shares go up and down completely randomly.
Pair Corralation between NYSE Composite and Direxion Shares
Assuming the 90 days trading horizon NYSE Composite is expected to generate 155.69 times less return on investment than Direxion Shares. But when comparing it to its historical volatility, NYSE Composite is 129.86 times less risky than Direxion Shares. It trades about 0.08 of its potential returns per unit of risk. Direxion Shares ETF is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.00 in Direxion Shares ETF on August 30, 2024 and sell it today you would earn a total of 2,512 from holding Direxion Shares ETF or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 22.22% |
| Values | Daily Returns |
NYSE Composite vs. Direxion Shares ETF
Performance |
| Timeline |
NYSE Composite and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Direxion Shares ETF
Pair trading matchups for Direxion Shares
Pair Trading with NYSE Composite and Direxion Shares
The main advantage of trading using opposite NYSE Composite and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Direxion Shares 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 Shares will offset losses from the drop in Direxion Shares' long position.| NYSE Composite vs. Sphere Entertainment Co | NYSE Composite vs. Weibo Corp | NYSE Composite vs. BCE Inc | NYSE Composite vs. Pinterest |
| Direxion Shares vs. First Trust Exchange Traded | Direxion Shares vs. Ultimus Managers Trust | Direxion Shares vs. Horizon Kinetics Medical | Direxion Shares vs. Harbor Health Care |
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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