Correlation Between SPDR SP and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Direxion 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 SPDR SP and Direxion Daily 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 Daily 7 10, you can compare the effects of market volatilities on SPDR SP and Direxion 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 SPDR SP with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Direxion Daily.
Diversification Opportunities for SPDR SP and Direxion Daily
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SPDR and Direxion is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 and Direxion Daily 7 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily 7 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 Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily 7 has no effect on the direction of SPDR SP i.e., SPDR SP and Direxion Daily go up and down completely randomly.
Pair Corralation between SPDR SP and Direxion Daily
Considering the 90-day investment horizon SPDR SP is expected to generate 1.57 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, SPDR SP 500 is 1.53 times less risky than Direxion Daily. It trades about 0.15 of its potential returns per unit of risk. Direxion Daily 7 10 is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,264 in Direxion Daily 7 10 on August 28, 2024 and sell it today you would earn a total of 147.00 from holding Direxion Daily 7 10 or generate 11.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 500 vs. Direxion Daily 7 10
Performance |
| Timeline |
| SPDR SP 500 |
| Direxion Daily 7 |
SPDR SP and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Direxion Daily
The main advantage of trading using opposite SPDR SP and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Direxion 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 Direxion Daily will offset losses from the drop in Direxion Daily'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 Daily vs. Direxion Daily 7 10 | Direxion Daily vs. Direxion Daily 20 | Direxion Daily vs. Direxion Daily MSCI | Direxion Daily vs. Direxion Daily Real |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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