Correlation Between SPDR SP and Direxion
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Direxion 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 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, you can compare the effects of market volatilities on SPDR SP and Direxion 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Direxion.
Diversification Opportunities for SPDR SP and Direxion
Very good diversification
The 3 months correlation between SPDR and Direxion is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of SPDR SP i.e., SPDR SP and Direxion go up and down completely randomly.
Pair Corralation between SPDR SP and Direxion
Considering the 90-day investment horizon SPDR SP 500 is expected to generate 1.08 times more return on investment than Direxion. However, SPDR SP is 1.08 times more volatile than Direxion. It trades about 0.11 of its potential returns per unit of risk. Direxion is currently generating about -0.01 per unit of risk. If you would invest 38,815 in SPDR SP 500 on August 26, 2024 and sell it today you would earn a total of 20,736 from holding SPDR SP 500 or generate 53.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 19.32% |
| Values | Daily Returns |
SPDR SP 500 vs. Direxion
Performance |
| Timeline |
| SPDR SP 500 |
| Direxion |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
SPDR SP and Direxion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Direxion
The main advantage of trading using opposite SPDR SP and Direxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Direxion 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 will offset losses from the drop in Direxion's long position.| SPDR SP vs. FT Vest Equity | SPDR SP vs. Northern Lights | SPDR SP vs. Dimensional International High | SPDR SP vs. First Trust Exchange Traded |
| Direxion vs. Blackrock Muniholdings Ny | Direxion vs. MFS Investment Grade | Direxion vs. Eaton Vance National | Direxion vs. Invesco High Income |
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 Stocks Directory module to find actively traded stocks across global markets.
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