Correlation Between Vanguard Total and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both Vanguard Total 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 Total 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 Total Stock and Direxion Shares ETF, you can compare the effects of market volatilities on Vanguard Total 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 Total with a short position of Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Direxion Shares.
Diversification Opportunities for Vanguard Total and Direxion Shares
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Direxion is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock 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 Total 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 Total Stock 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 Total i.e., Vanguard Total and Direxion Shares go up and down completely randomly.
Pair Corralation between Vanguard Total and Direxion Shares
Considering the 90-day investment horizon Vanguard Total is expected to generate 1.44 times less return on investment than Direxion Shares. But when comparing it to its historical volatility, Vanguard Total Stock is 2.34 times less risky than Direxion Shares. It trades about 0.14 of its potential returns per unit of risk. Direxion Shares ETF is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,109 in Direxion Shares ETF on September 1, 2024 and sell it today you would earn a total of 671.00 from holding Direxion Shares ETF or generate 21.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Vanguard Total Stock vs. Direxion Shares ETF
Performance |
| Timeline |
| Vanguard Total Stock |
| Direxion Shares ETF |
Vanguard Total and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Total and Direxion Shares
The main advantage of trading using opposite Vanguard Total and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Total vs. Vanguard SP 500 | Vanguard Total vs. Vanguard Total International | Vanguard Total vs. Vanguard Real Estate | Vanguard Total vs. Vanguard Total Bond |
| Direxion Shares vs. Vanguard Total Stock | Direxion Shares vs. SPDR SP 500 | Direxion Shares vs. iShares Core SP | Direxion Shares vs. Vanguard Dividend Appreciation |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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