Correlation Between SCOM and Direxion Daily

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

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

Diversification Opportunities for SCOM and Direxion Daily

0.0

Correlation Coefficient

SCOM  Direxion Daily

Pay attention - limited upside

The 3 months correlation between SCOM and Direxion is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SCOM and Direxion Daily Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Real and SCOM 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 SCOM 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 Real has no effect on the direction of SCOM i.e., SCOM and Direxion Daily go up and down completely randomly.

Pair Corralation between SCOM and Direxion Daily

If you would invest  3,689  in Direxion Daily Real on January 31, 2024 and sell it today you would earn a total of  598.00  from holding Direxion Daily Real or generate 16.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

SCOM  vs.  Direxion Daily Real

SCOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, SCOM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Direxion Daily Real

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Real are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with SCOM and Direxion Daily

The main advantage of trading using opposite SCOM and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOM 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 SCOM and Direxion Daily Real 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.