Correlation Between Direxion Daily and American Airlines
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and American Airlines 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 American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Gold and American Airlines Group, you can compare the effects of market volatilities on Direxion Daily and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and American Airlines.
Diversification Opportunities for Direxion Daily and American Airlines
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and American is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Gold and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 Gold are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Direxion Daily i.e., Direxion Daily and American Airlines go up and down completely randomly.
Pair Corralation between Direxion Daily and American Airlines
Given the investment horizon of 90 days Direxion Daily Gold is expected to generate 1.56 times more return on investment than American Airlines. However, Direxion Daily is 1.56 times more volatile than American Airlines Group. It trades about 0.0 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.01 per unit of risk. If you would invest 5,557 in Direxion Daily Gold on January 17, 2024 and sell it today you would lose (1,728) from holding Direxion Daily Gold or give up 31.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Direxion Daily Gold vs. American Airlines Group
Performance |
| Timeline |
| Direxion Daily Gold |
| American Airlines |
Direxion Daily and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and American Airlines
The main advantage of trading using opposite Direxion Daily and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Direxion Daily vs. HUMANA INC | Direxion Daily vs. Morningstar Unconstrained Allocation | Direxion Daily vs. Thrivent High Yield | Direxion Daily vs. High Yield Municipal Fund |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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