Correlation Between Invesco CurrencyShares and Direxion Daily

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

By analyzing existing cross correlation between Invesco CurrencyShares Japanese and Direxion Daily CSI, you can compare the effects of market volatilities on Invesco CurrencyShares 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 Invesco CurrencyShares with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco CurrencyShares and Direxion Daily.

Diversification Opportunities for Invesco CurrencyShares and Direxion Daily

-0.6

Correlation Coefficient

Invesco CurrencyShares  Direxion Daily

Excellent diversification

The 3 months correlation between Invesco and Direxion is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and Direxion Daily CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily CSI and Invesco CurrencyShares 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 Invesco CurrencyShares Japanese 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 CSI has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and Direxion Daily go up and down completely randomly.

Pair Corralation between Invesco CurrencyShares and Direxion Daily

Considering the 90-day investment horizon Invesco CurrencyShares Japanese is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, Invesco CurrencyShares Japanese is 5.97 times less risky than Direxion Daily. The etf trades about -0.07 of its potential returns per unit of risk. The Direxion Daily CSI is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  3,050  in Direxion Daily CSI on February 4, 2024 and sell it today you would earn a total of  944.00  from holding Direxion Daily CSI or generate 30.95% return on investment over 90 days.

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

Invesco CurrencyShares Japanes  vs.  Direxion Daily CSI

Invesco CurrencyShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco CurrencyShares Japanese has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Invesco CurrencyShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Direxion Daily CSI

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily CSI are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical and fundamental indicators, Direxion Daily sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco CurrencyShares and Direxion Daily

The main advantage of trading using opposite Invesco CurrencyShares and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco CurrencyShares 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 Invesco CurrencyShares Japanese and Direxion Daily CSI 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.