Correlation Between Direxion Shares and FT Vest
Can any of the company-specific risk be diversified away by investing in both Direxion Shares and FT Vest 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 Shares and FT Vest into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Shares ETF and FT Vest Equity, you can compare the effects of market volatilities on Direxion Shares and FT Vest 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 Shares with a short position of FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Shares and FT Vest.
Diversification Opportunities for Direxion Shares and FT Vest
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Direxion and DHDG is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Shares ETF and FT Vest Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Equity and Direxion Shares 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 Shares ETF are associated (or correlated) with FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Equity has no effect on the direction of Direxion Shares i.e., Direxion Shares and FT Vest go up and down completely randomly.
Pair Corralation between Direxion Shares and FT Vest
Given the investment horizon of 90 days Direxion Shares ETF is expected to under-perform the FT Vest. In addition to that, Direxion Shares is 4.89 times more volatile than FT Vest Equity. It trades about -0.32 of its total potential returns per unit of risk. FT Vest Equity is currently generating about 0.14 per unit of volatility. If you would invest 3,084 in FT Vest Equity on September 12, 2024 and sell it today you would earn a total of 22.00 from holding FT Vest Equity or generate 0.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Direxion Shares ETF vs. FT Vest Equity
Performance |
| Timeline |
| Direxion Shares ETF |
| FT Vest Equity |
Direxion Shares and FT Vest Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Shares and FT Vest
The main advantage of trading using opposite Direxion Shares and FT Vest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Shares position performs unexpectedly, FT Vest 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 FT Vest will offset losses from the drop in FT Vest's long position.| Direxion Shares vs. FT Vest Equity | Direxion Shares vs. Northern Lights | Direxion Shares vs. Dimensional International High | Direxion Shares vs. JPMorgan Fundamental Data |
| FT Vest vs. Northern Lights | FT Vest vs. Dimensional International High | FT Vest vs. JPMorgan Fundamental Data | FT Vest vs. Matthews China Discovery |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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