Correlation Between Direxion Daily and AXS 2X
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and AXS 2X 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 AXS 2X 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 AXS 2X Innovation, you can compare the effects of market volatilities on Direxion Daily and AXS 2X 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 AXS 2X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and AXS 2X.
Diversification Opportunities for Direxion Daily and AXS 2X
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and AXS is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Technology and AXS 2X Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXS 2X Innovation 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 AXS 2X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXS 2X Innovation has no effect on the direction of Direxion Daily i.e., Direxion Daily and AXS 2X go up and down completely randomly.
Pair Corralation between Direxion Daily and AXS 2X
Given the investment horizon of 90 days Direxion Daily is expected to generate 8.93 times less return on investment than AXS 2X. But when comparing it to its historical volatility, Direxion Daily Technology is 1.51 times less risky than AXS 2X. It trades about 0.04 of its potential returns per unit of risk. AXS 2X Innovation is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 6,649 in AXS 2X Innovation on August 28, 2024 and sell it today you would earn a total of 2,373 from holding AXS 2X Innovation or generate 35.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Technology vs. AXS 2X Innovation
Performance |
| Timeline |
| Direxion Daily Technology |
| AXS 2X Innovation |
Direxion Daily and AXS 2X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and AXS 2X
The main advantage of trading using opposite Direxion Daily and AXS 2X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, AXS 2X 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 AXS 2X will offset losses from the drop in AXS 2X'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 |
| AXS 2X vs. Direxion Daily SP | AXS 2X vs. Direxion Daily Semiconductor | AXS 2X vs. Direxion Daily Semiconductor |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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