Correlation Between SPDR SP and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and Direxion Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and Direxion Shares ETF, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Direxion Shares.
Diversification Opportunities for SPDR SP and Direxion Shares
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between SPDR and Direxion is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 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 SPDR 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 SPDR SP 500 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 SPDR SP i.e., SPDR SP and Direxion Shares go up and down completely randomly.
Pair Corralation between SPDR SP and Direxion Shares
Assuming the 90 days trading horizon SPDR SP 500 is expected to generate 0.29 times more return on investment than Direxion Shares. However, SPDR SP 500 is 3.43 times less risky than Direxion Shares. It trades about 0.22 of its potential returns per unit of risk. Direxion Shares ETF is currently generating about 0.04 per unit of risk. If you would invest 862,728 in SPDR SP 500 on September 3, 2024 and sell it today you would earn a total of 361,272 from holding SPDR SP 500 or generate 41.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 500 vs. Direxion Shares ETF
Performance |
| Timeline |
| SPDR SP 500 |
| Direxion Shares ETF |
SPDR SP and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Direxion Shares
The main advantage of trading using opposite SPDR SP and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.| SPDR SP vs. Vanguard Index Funds | SPDR SP vs. Vanguard Index Funds | SPDR SP vs. Vanguard STAR Funds | SPDR SP vs. iShares Trust |
| Direxion Shares vs. Vanguard Index Funds | Direxion Shares vs. Vanguard Index Funds | Direxion Shares vs. Vanguard STAR Funds | Direxion Shares vs. SPDR SP 500 |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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