Correlation Between Direxion Daily and Innovator Hedged
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Innovator Hedged 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 Innovator Hedged into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Technology and Innovator Hedged Nasdaq 100, you can compare the effects of market volatilities on Direxion Daily and Innovator Hedged 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 Innovator Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Innovator Hedged.
Diversification Opportunities for Direxion Daily and Innovator Hedged
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Direxion and Innovator is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Technology and Innovator Hedged Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Hedged Nasdaq 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 Technology are associated (or correlated) with Innovator Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Hedged Nasdaq has no effect on the direction of Direxion Daily i.e., Direxion Daily and Innovator Hedged go up and down completely randomly.
Pair Corralation between Direxion Daily and Innovator Hedged
Given the investment horizon of 90 days Direxion Daily Technology is expected to generate 6.57 times more return on investment than Innovator Hedged. However, Direxion Daily is 6.57 times more volatile than Innovator Hedged Nasdaq 100. It trades about 0.03 of its potential returns per unit of risk. Innovator Hedged Nasdaq 100 is currently generating about 0.08 per unit of risk. If you would invest 7,952 in Direxion Daily Technology on November 28, 2024 and sell it today you would earn a total of 276.00 from holding Direxion Daily Technology or generate 3.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 71.04% |
| Values | Daily Returns |
Direxion Daily Technology vs. Innovator Hedged Nasdaq 100
Performance |
| Timeline |
| Direxion Daily Technology |
| Innovator Hedged Nasdaq |
Direxion Daily and Innovator Hedged Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Innovator Hedged
The main advantage of trading using opposite Direxion Daily and Innovator Hedged positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Innovator Hedged 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 Innovator Hedged will offset losses from the drop in Innovator Hedged's long position.| Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily SP500 | Direxion Daily vs. Direxion Daily Technology | Direxion Daily vs. Direxion Daily SP |
| Innovator Hedged vs. FT Vest Equity | Innovator Hedged vs. Northern Lights | Innovator Hedged vs. Dimensional International High | Innovator Hedged vs. First Trust Exchange Traded |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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