Correlation Between Direxion Daily and Roundhill Daily
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Roundhill 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 Direxion Daily and Roundhill Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily SP and Roundhill Daily Inverse, you can compare the effects of market volatilities on Direxion Daily and Roundhill 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 Direxion Daily with a short position of Roundhill Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Roundhill Daily.
Diversification Opportunities for Direxion Daily and Roundhill Daily
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direxion and Roundhill is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and Roundhill Daily Inverse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Daily Inverse 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 SP are associated (or correlated) with Roundhill Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Daily Inverse has no effect on the direction of Direxion Daily i.e., Direxion Daily and Roundhill Daily go up and down completely randomly.
Pair Corralation between Direxion Daily and Roundhill Daily
Given the investment horizon of 90 days Direxion Daily SP is expected to under-perform the Roundhill Daily. But the etf apears to be less risky and, when comparing its historical volatility, Direxion Daily SP is 1.59 times less risky than Roundhill Daily. The etf trades about -0.05 of its potential returns per unit of risk. The Roundhill Daily Inverse is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,857 in Roundhill Daily Inverse on September 14, 2024 and sell it today you would earn a total of 167.00 from holding Roundhill Daily Inverse or generate 8.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 59.09% |
| Values | Daily Returns |
Direxion Daily SP vs. Roundhill Daily Inverse
Performance |
| Timeline |
| Direxion Daily SP |
| Roundhill Daily Inverse |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Direxion Daily and Roundhill Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Roundhill Daily
The main advantage of trading using opposite Direxion Daily and Roundhill Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Roundhill 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 Roundhill Daily will offset losses from the drop in Roundhill Daily's long position.| Direxion Daily vs. Direxion Daily SP500 | Direxion Daily vs. Direxion Daily Small | Direxion Daily vs. ProShares UltraPro Short | Direxion Daily vs. ProShares UltraPro Short |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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