Correlation Between Direxion Daily and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Direxion Daily 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 Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Travel and Direxion Daily Cnsmr, you can compare the effects of market volatilities on Direxion Daily and Direxion Daily 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 Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Direxion Daily.
Diversification Opportunities for Direxion Daily and Direxion Daily
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and Direxion is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Travel and Direxion Daily Cnsmr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Cnsmr 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 Travel are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Cnsmr has no effect on the direction of Direxion Daily i.e., Direxion Daily and Direxion Daily go up and down completely randomly.
Pair Corralation between Direxion Daily and Direxion Daily
Given the investment horizon of 90 days Direxion Daily is expected to generate 5.04 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Direxion Daily Travel is 1.7 times less risky than Direxion Daily. It trades about 0.21 of its potential returns per unit of risk. Direxion Daily Cnsmr is currently generating about 0.62 of returns per unit of risk over similar time horizon. If you would invest 4,932 in Direxion Daily Cnsmr on September 18, 2024 and sell it today you would earn a total of 1,765 from holding Direxion Daily Cnsmr or generate 35.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Travel vs. Direxion Daily Cnsmr
Performance |
| Timeline |
| Direxion Daily Travel |
| Direxion Daily Cnsmr |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Direxion Daily and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Direxion Daily
The main advantage of trading using opposite Direxion Daily and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Direxion Daily 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 Daily will offset losses from the drop in Direxion Daily's long position.The idea behind Direxion Daily Travel and Direxion Daily Cnsmr 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.| Direxion Daily vs. Direxion Daily Industrials | Direxion Daily vs. Direxion Daily Transportation | Direxion Daily vs. Direxion Daily Dow | Direxion Daily vs. Direxion Daily Utilities |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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