Correlation Between Direxion Daily and UST Inc
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and UST Inc 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 UST Inc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily 20 and ProShares Ultra 7 10, you can compare the effects of market volatilities on Direxion Daily and UST Inc 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 UST Inc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and UST Inc.
Diversification Opportunities for Direxion Daily and UST Inc
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and UST is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily 20 and ProShares Ultra 7 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Ultra 7 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 20 are associated (or correlated) with UST Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Ultra 7 has no effect on the direction of Direxion Daily i.e., Direxion Daily and UST Inc go up and down completely randomly.
Pair Corralation between Direxion Daily and UST Inc
Considering the 90-day investment horizon Direxion Daily 20 is expected to generate 2.58 times more return on investment than UST Inc. However, Direxion Daily is 2.58 times more volatile than ProShares Ultra 7 10. It trades about 0.05 of its potential returns per unit of risk. ProShares Ultra 7 10 is currently generating about 0.09 per unit of risk. If you would invest 4,026 in Direxion Daily 20 on November 2, 2024 and sell it today you would earn a total of 59.00 from holding Direxion Daily 20 or generate 1.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily 20 vs. ProShares Ultra 7 10
Performance |
| Timeline |
| Direxion Daily 20 |
| ProShares Ultra 7 |
Direxion Daily and UST Inc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and UST Inc
The main advantage of trading using opposite Direxion Daily and UST Inc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, UST Inc 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 UST Inc will offset losses from the drop in UST Inc's long position.| Direxion Daily vs. Direxion Daily 20 | Direxion Daily vs. Direxion Daily 7 10 | Direxion Daily vs. Direxion Daily Real | Direxion Daily vs. Direxion Daily MSCI |
| UST Inc vs. ProShares Ultra 20 | UST Inc vs. Universal | UST Inc vs. Direxion Daily 7 10 | UST Inc vs. Waters |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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