Correlation Between Snap and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Direxion Shares 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 Shares ETF, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Direxion Shares.
Diversification Opportunities for Snap and Direxion Shares
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Snap and Direxion is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc 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 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 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 Snap i.e., Snap and Direxion Shares go up and down completely randomly.
Pair Corralation between Snap and Direxion Shares
Given the investment horizon of 90 days Snap is expected to generate 5.46 times less return on investment than Direxion Shares. But when comparing it to its historical volatility, Snap Inc is 2.14 times less risky than Direxion Shares. It trades about 0.1 of its potential returns per unit of risk. Direxion Shares ETF is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,313 in Direxion Shares ETF on August 28, 2024 and sell it today you would earn a total of 750.00 from holding Direxion Shares ETF or generate 57.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Direxion Shares ETF
Performance |
| Timeline |
| Snap Inc |
| Direxion Shares ETF |
Snap and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Direxion Shares
The main advantage of trading using opposite Snap and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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.The idea behind Snap Inc and Direxion Shares ETF 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 Shares vs. Direxion Daily SP | Direxion Shares vs. Direxion Daily Semiconductor | Direxion Shares vs. Direxion Daily Semiconductor |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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