Correlation Between Direxion Daily and Franklin Templeton
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Franklin Templeton 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 Franklin Templeton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Dow and Franklin Templeton ETF, you can compare the effects of market volatilities on Direxion Daily and Franklin Templeton 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 Franklin Templeton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Franklin Templeton.
Diversification Opportunities for Direxion Daily and Franklin Templeton
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Direxion and Franklin is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Dow and Franklin Templeton ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Templeton ETF 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 Dow are associated (or correlated) with Franklin Templeton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Templeton ETF has no effect on the direction of Direxion Daily i.e., Direxion Daily and Franklin Templeton go up and down completely randomly.
Pair Corralation between Direxion Daily and Franklin Templeton
Given the investment horizon of 90 days Direxion Daily Dow is expected to generate 9.7 times more return on investment than Franklin Templeton. However, Direxion Daily is 9.7 times more volatile than Franklin Templeton ETF. It trades about 0.48 of its potential returns per unit of risk. Franklin Templeton ETF is currently generating about 0.05 per unit of risk. If you would invest 2,365 in Direxion Daily Dow on September 18, 2024 and sell it today you would earn a total of 807.50 from holding Direxion Daily Dow or generate 34.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Dow vs. Franklin Templeton ETF
Performance |
| Timeline |
| Direxion Daily Dow |
| Franklin Templeton ETF |
Direxion Daily and Franklin Templeton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Franklin Templeton
The main advantage of trading using opposite Direxion Daily and Franklin Templeton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Franklin Templeton 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 Franklin Templeton will offset losses from the drop in Franklin Templeton's long position.| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Cnsmr | Direxion Daily vs. Direxion Daily Transportation | Direxion Daily vs. Direxion Daily Retail |
| Franklin Templeton vs. ClearShares Ultra Short Maturity | Franklin Templeton vs. PGIM Active High | Franklin Templeton vs. Pacer Trendpilot Bond | Franklin Templeton vs. Pacer Lunt Large |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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