Correlation Between Direxion Daily and IShares JP
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and IShares JP 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 IShares JP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily SP500 and iShares JP Morgan, you can compare the effects of market volatilities on Direxion Daily and IShares JP 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 IShares JP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and IShares JP.
Diversification Opportunities for Direxion Daily and IShares JP
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP500 and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan 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 SP500 are associated (or correlated) with IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of Direxion Daily i.e., Direxion Daily and IShares JP go up and down completely randomly.
Pair Corralation between Direxion Daily and IShares JP
Given the investment horizon of 90 days Direxion Daily SP500 is expected to generate 7.57 times more return on investment than IShares JP. However, Direxion Daily is 7.57 times more volatile than iShares JP Morgan. It trades about 0.13 of its potential returns per unit of risk. iShares JP Morgan is currently generating about 0.31 per unit of risk. If you would invest 17,711 in Direxion Daily SP500 on November 18, 2024 and sell it today you would earn a total of 886.00 from holding Direxion Daily SP500 or generate 5.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily SP500 vs. iShares JP Morgan
Performance |
| Timeline |
| Direxion Daily SP500 |
| iShares JP Morgan |
Direxion Daily and IShares JP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and IShares JP
The main advantage of trading using opposite Direxion Daily and IShares JP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, IShares JP 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 IShares JP will offset losses from the drop in IShares JP's long position.| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Technology | Direxion Daily vs. Direxion Daily Small | Direxion Daily vs. Direxion Daily Semiconductor |
| IShares JP vs. VanEck Emerging Markets | IShares JP vs. iShares Intl High | IShares JP vs. iShares JP Morgan | IShares JP vs. iShares International High |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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