Correlation Between Direxion Daily and FT Cboe
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and FT Cboe 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 FT Cboe 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 FT Cboe Vest, you can compare the effects of market volatilities on Direxion Daily and FT Cboe 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 FT Cboe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and FT Cboe.
Diversification Opportunities for Direxion Daily and FT Cboe
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Direxion and RDVI is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Dow and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Direxion Daily i.e., Direxion Daily and FT Cboe go up and down completely randomly.
Pair Corralation between Direxion Daily and FT Cboe
Given the investment horizon of 90 days Direxion Daily Dow is expected to generate 2.79 times more return on investment than FT Cboe. However, Direxion Daily is 2.79 times more volatile than FT Cboe Vest. It trades about 0.34 of its potential returns per unit of risk. FT Cboe Vest is currently generating about 0.06 per unit of risk. If you would invest 2,041 in Direxion Daily Dow on September 13, 2024 and sell it today you would earn a total of 1,158 from holding Direxion Daily Dow or generate 56.74% 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 Dow vs. FT Cboe Vest
Performance |
| Timeline |
| Direxion Daily Dow |
| FT Cboe Vest |
Direxion Daily and FT Cboe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and FT Cboe
The main advantage of trading using opposite Direxion Daily and FT Cboe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, FT Cboe 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 FT Cboe will offset losses from the drop in FT Cboe's long position.| Direxion Daily vs. ProShares Ultra SP500 | Direxion Daily vs. Direxion Daily SP500 | Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily SP |
| FT Cboe vs. Global X SP | FT Cboe vs. Amplify CWP Enhanced | FT Cboe vs. JPMorgan Nasdaq Equity | FT Cboe vs. NEOS ETF 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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