Correlation Between IShares MSCI and Direxion Daily

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Can any of the company-specific risk be diversified away by investing in both IShares MSCI and Direxion Daily 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 IShares MSCI and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IShares MSCI EAFE and Direxion Daily Junior, you can compare the effects of market volatilities on IShares MSCI and Direxion Daily 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 IShares MSCI with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Direxion Daily.

Diversification Opportunities for IShares MSCI and Direxion Daily

0.0
  Correlation Coefficient

Pay attention - limited upside

The 1 month correlation between IShares and Direxion is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding IShares MSCI EAFE and Direxion Daily Junior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Junior and IShares MSCI 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 IShares MSCI EAFE are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Junior has no effect on the direction of IShares MSCI i.e., IShares MSCI and Direxion Daily go up and down completely randomly.

Pair Corralation between IShares MSCI and Direxion Daily

If you would invest  6,211  in IShares MSCI EAFE on December 29, 2023 and sell it today you would earn a total of  122.00  from holding IShares MSCI EAFE or generate 1.96% return on investment over 90 days.
Time Period1 Month [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

IShares MSCI EAFE  vs.  Direxion Daily Junior

 Performance 
       Timeline  
IShares MSCI EAFE 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in IShares MSCI EAFE are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Direxion Daily Junior 

Risk-Adjusted Performance

32 of 100

 
Low
 
High
Very Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Junior are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Direxion Daily reported solid returns over the last few months and may actually be approaching a breakup point.

IShares MSCI and Direxion Daily Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares MSCI and Direxion Daily

The main advantage of trading using opposite IShares MSCI and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, Direxion Daily 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 Daily will offset losses from the drop in Direxion Daily's long position.
The idea behind IShares MSCI EAFE and Direxion Daily Junior pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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