Correlation Between Vanguard Small and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both Vanguard Small 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 Vanguard Small and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Small Cap Index and Direxion Daily SP, you can compare the effects of market volatilities on Vanguard Small 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 Vanguard Small with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small and Direxion Daily.
Diversification Opportunities for Vanguard Small and Direxion Daily
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vanguard and Direxion is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and Vanguard Small 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 Vanguard Small Cap Index 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 SP has no effect on the direction of Vanguard Small i.e., Vanguard Small and Direxion Daily go up and down completely randomly.
Pair Corralation between Vanguard Small and Direxion Daily
Allowing for the 90-day total investment horizon Vanguard Small is expected to generate 1.78 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Vanguard Small Cap Index is 2.95 times less risky than Direxion Daily. It trades about 0.19 of its potential returns per unit of risk. Direxion Daily SP is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,007 in Direxion Daily SP on November 9, 2024 and sell it today you would earn a total of 56.00 from holding Direxion Daily SP or generate 5.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Small Cap Index vs. Direxion Daily SP
Performance |
| Timeline |
| Vanguard Small Cap |
| Direxion Daily SP |
Vanguard Small and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small and Direxion Daily
The main advantage of trading using opposite Vanguard Small and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small 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.| Vanguard Small vs. Vanguard Mid Cap Index | Vanguard Small vs. Vanguard Small Cap Value | Vanguard Small vs. Vanguard FTSE Emerging | Vanguard Small vs. Vanguard Large Cap Index |
| Direxion Daily vs. Ultimus Managers Trust | Direxion Daily vs. EA Series Trust | Direxion Daily vs. Global X MLP | Direxion Daily vs. ETRACS Quarterly Pay |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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