Correlation Between Vanguard Index and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both Vanguard Index and Direxion Shares 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 Index and Direxion Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Index Funds and Direxion Shares ETF, you can compare the effects of market volatilities on Vanguard Index and Direxion Shares 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 Index with a short position of Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Index and Direxion Shares.
Diversification Opportunities for Vanguard Index and Direxion Shares
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vanguard and Direxion is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Index Funds and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF and Vanguard Index 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 Index Funds are associated (or correlated) with Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of Vanguard Index i.e., Vanguard Index and Direxion Shares go up and down completely randomly.
Pair Corralation between Vanguard Index and Direxion Shares
Assuming the 90 days trading horizon Vanguard Index Funds is expected to generate 0.36 times more return on investment than Direxion Shares. However, Vanguard Index Funds is 2.78 times less risky than Direxion Shares. It trades about -0.01 of its potential returns per unit of risk. Direxion Shares ETF is currently generating about -0.06 per unit of risk. If you would invest 1,119,000 in Vanguard Index Funds on September 12, 2024 and sell it today you would lose (2,749) from holding Vanguard Index Funds or give up 0.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Index Funds vs. Direxion Shares ETF
Performance |
| Timeline |
| Vanguard Index Funds |
| Direxion Shares ETF |
Vanguard Index and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Index and Direxion Shares
The main advantage of trading using opposite Vanguard Index and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Index position performs unexpectedly, Direxion Shares 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 Shares will offset losses from the drop in Direxion Shares' long position.| Vanguard Index vs. Vanguard Funds Public | Vanguard Index vs. Vanguard Specialized Funds | Vanguard Index vs. Vanguard World | Vanguard Index vs. Vanguard Index Funds |
| Direxion Shares vs. Direxion Shares ETF | Direxion Shares vs. Direxion Shares ETF | Direxion Shares vs. Direxion Shares ETF | Direxion Shares vs. iShares Trust |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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