Correlation Between Invesco SP and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Invesco SP 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 Invesco SP and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Invesco SP 500 and Direxion Daily SP, you can compare the effects of market volatilities on Invesco SP 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 Invesco SP with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco SP and Direxion Daily.
Diversification Opportunities for Invesco SP and Direxion Daily
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Invesco and Direxion is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and Invesco SP 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 Invesco SP 500 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 SP has no effect on the direction of Invesco SP i.e., Invesco SP and Direxion Daily go up and down completely randomly.
Pair Corralation between Invesco SP and Direxion Daily
Given the investment horizon of 90 days Invesco SP 500 is expected to generate 0.25 times more return on investment than Direxion Daily. However, Invesco SP 500 is 4.03 times less risky than Direxion Daily. It trades about 0.08 of its potential returns per unit of risk. Direxion Daily SP is currently generating about -0.36 per unit of risk. If you would invest 3,086 in Invesco SP 500 on September 2, 2024 and sell it today you would earn a total of 36.00 from holding Invesco SP 500 or generate 1.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Invesco SP 500 vs. Direxion Daily SP
Performance |
| Timeline |
| Invesco SP 500 |
| Direxion Daily SP |
Invesco SP and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Invesco SP and Direxion Daily
The main advantage of trading using opposite Invesco SP and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco SP 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.| Invesco SP vs. First Trust Exchange Traded | Invesco SP vs. Ultimus Managers Trust | Invesco SP vs. Horizon Kinetics Medical | Invesco SP 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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