Correlation Between Direxion Daily and Roundhill Investments
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Roundhill Investments 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 Roundhill Investments 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 Roundhill Investments, you can compare the effects of market volatilities on Direxion Daily and Roundhill Investments 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 Roundhill Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Roundhill Investments.
Diversification Opportunities for Direxion Daily and Roundhill Investments
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Direxion and Roundhill is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Cnsmr and Roundhill Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Investments 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 Roundhill Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Investments has no effect on the direction of Direxion Daily i.e., Direxion Daily and Roundhill Investments go up and down completely randomly.
Pair Corralation between Direxion Daily and Roundhill Investments
Given the investment horizon of 90 days Direxion Daily Cnsmr is expected to generate 1.84 times more return on investment than Roundhill Investments. However, Direxion Daily is 1.84 times more volatile than Roundhill Investments. It trades about 0.19 of its potential returns per unit of risk. Roundhill Investments is currently generating about -0.04 per unit of risk. If you would invest 3,231 in Direxion Daily Cnsmr on November 2, 2024 and sell it today you would earn a total of 2,783 from holding Direxion Daily Cnsmr or generate 86.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 62.14% |
| Values | Daily Returns |
Direxion Daily Cnsmr vs. Roundhill Investments
Performance |
| Timeline |
| Direxion Daily Cnsmr |
| Roundhill Investments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Direxion Daily and Roundhill Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Roundhill Investments
The main advantage of trading using opposite Direxion Daily and Roundhill Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Roundhill Investments 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 Roundhill Investments will offset losses from the drop in Roundhill Investments' long position.| Direxion Daily vs. Direxion Daily Industrials | Direxion Daily vs. Direxion Daily Transportation | Direxion Daily vs. Direxion Daily Dow | Direxion Daily vs. Direxion Daily Utilities |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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