Correlation Between Direxion Daily and MicroSectors FANG
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and MicroSectors FANG 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 MicroSectors FANG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Cnsmr and MicroSectors FANG Index, you can compare the effects of market volatilities on Direxion Daily and MicroSectors FANG 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 MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and MicroSectors FANG.
Diversification Opportunities for Direxion Daily and MicroSectors FANG
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Direxion and MicroSectors is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Cnsmr and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index 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 Cnsmr are associated (or correlated) with MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of Direxion Daily i.e., Direxion Daily and MicroSectors FANG go up and down completely randomly.
Pair Corralation between Direxion Daily and MicroSectors FANG
Given the investment horizon of 90 days Direxion Daily Cnsmr is expected to generate 1.47 times more return on investment than MicroSectors FANG. However, Direxion Daily is 1.47 times more volatile than MicroSectors FANG Index. It trades about 0.38 of its potential returns per unit of risk. MicroSectors FANG Index is currently generating about 0.18 per unit of risk. If you would invest 3,683 in Direxion Daily Cnsmr on August 24, 2024 and sell it today you would earn a total of 1,422 from holding Direxion Daily Cnsmr or generate 38.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Cnsmr vs. MicroSectors FANG Index
Performance |
| Timeline |
| Direxion Daily Cnsmr |
| MicroSectors FANG Index |
Direxion Daily and MicroSectors FANG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and MicroSectors FANG
The main advantage of trading using opposite Direxion Daily and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, MicroSectors FANG 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Technology | Direxion Daily vs. Direxion Daily Small |
| MicroSectors FANG vs. MicroSectors FANG ETN | MicroSectors FANG vs. Direxion Daily Dow | MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Cnsmr |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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