Correlation Between Materials Select and Direxion
Can any of the company-specific risk be diversified away by investing in both Materials Select and Direxion 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 Materials Select and Direxion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Materials Select Sector and Direxion, you can compare the effects of market volatilities on Materials Select and Direxion 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 Materials Select with a short position of Direxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Select and Direxion.
Diversification Opportunities for Materials Select and Direxion
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Materials and Direxion is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Materials Select Sector and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion and Materials Select 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 Materials Select Sector are associated (or correlated) with Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of Materials Select i.e., Materials Select and Direxion go up and down completely randomly.
Pair Corralation between Materials Select and Direxion
Considering the 90-day investment horizon Materials Select Sector is expected to generate 0.55 times more return on investment than Direxion. However, Materials Select Sector is 1.83 times less risky than Direxion. It trades about 0.04 of its potential returns per unit of risk. Direxion is currently generating about -0.03 per unit of risk. If you would invest 7,855 in Materials Select Sector on August 29, 2024 and sell it today you would earn a total of 1,580 from holding Materials Select Sector or generate 20.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 81.65% |
| Values | Daily Returns |
Materials Select Sector vs. Direxion
Performance |
| Timeline |
| Materials Select Sector |
| Direxion |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Materials Select and Direxion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Materials Select and Direxion
The main advantage of trading using opposite Materials Select and Direxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Select position performs unexpectedly, Direxion 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 will offset losses from the drop in Direxion's long position.| Materials Select vs. Industrial Select Sector | Materials Select vs. Consumer Discretionary Select | Materials Select vs. Consumer Staples Select | Materials Select vs. Utilities Select Sector |
| Direxion vs. Global X Hydrogen | Direxion vs. Defiance Next Gen | Direxion vs. Fusion Fuel Green | Direxion vs. Amplify Lithium Battery |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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