Correlation Between Direxion Daily and MicroSectors Big

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and MicroSectors Big 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 MicroSectors Big into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Direxion Daily Regional and MicroSectors Big Oil, you can compare the effects of market volatilities on Direxion Daily and MicroSectors Big 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 MicroSectors Big. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and MicroSectors Big.

Diversification Opportunities for Direxion Daily and MicroSectors Big

0.18

Correlation Coefficient

Direxion Daily  MicroSectors Big

Average diversification

The 3 months correlation between Direxion and MicroSectors is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Regional and MicroSectors Big Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Big Oil 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 Regional are associated (or correlated) with MicroSectors Big. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Big Oil has no effect on the direction of Direxion Daily i.e., Direxion Daily and MicroSectors Big go up and down completely randomly.

Pair Corralation between Direxion Daily and MicroSectors Big

Given the investment horizon of 90 days Direxion Daily Regional is expected to generate 1.53 times more return on investment than MicroSectors Big. However, Direxion Daily is 1.53 times more volatile than MicroSectors Big Oil. It trades about -0.01 of its potential returns per unit of risk. MicroSectors Big Oil is currently generating about -0.09 per unit of risk. If you would invest  9,491  in Direxion Daily Regional on February 15, 2024 and sell it today you would lose (1,545) from holding Direxion Daily Regional or give up 16.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Direxion Daily Regional  vs.  MicroSectors Big Oil

Direxion Daily Regional

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Regional are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in June 2024.

MicroSectors Big Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MicroSectors Big Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's technical and fundamental indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with Direxion Daily and MicroSectors Big

The main advantage of trading using opposite Direxion Daily and MicroSectors Big positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, MicroSectors Big 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 MicroSectors Big will offset losses from the drop in MicroSectors Big's long position.

The idea behind Direxion Daily Regional and MicroSectors Big Oil 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.