Correlation Between Snap and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Direxion Daily SP, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Direxion Daily.
Diversification Opportunities for Snap and Direxion Daily
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Snap and Direxion is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc 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 Snap 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 Snap Inc 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 Snap i.e., Snap and Direxion Daily go up and down completely randomly.
Pair Corralation between Snap and Direxion Daily
Given the investment horizon of 90 days Snap is expected to generate 2.49 times less return on investment than Direxion Daily. In addition to that, Snap is 1.47 times more volatile than Direxion Daily SP. It trades about 0.08 of its total potential returns per unit of risk. Direxion Daily SP is currently generating about 0.3 per unit of volatility. If you would invest 2,745 in Direxion Daily SP on August 30, 2024 and sell it today you would earn a total of 611.00 from holding Direxion Daily SP or generate 22.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Direxion Daily SP
Performance |
| Timeline |
| Snap Inc |
| Direxion Daily SP |
Snap and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Direxion Daily
The main advantage of trading using opposite Snap and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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 Snap Inc and Direxion Daily SP 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. ABIVAX Socit Anonyme | Direxion Daily vs. Morningstar Unconstrained Allocation | Direxion Daily vs. SPACE | Direxion Daily vs. Knife River |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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