Correlation Between Direxion Daily and Direxion Daily

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

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

Diversification Opportunities for Direxion Daily and Direxion Daily

0.49

Correlation Coefficient

Direxion Daily  Direxion Daily

Very weak diversification

The 3 months correlation between Direxion and Direxion is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Utilities and Direxion Daily Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Select 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 Utilities 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 Select has no effect on the direction of Direxion Daily i.e., Direxion Daily and Direxion Daily go up and down completely randomly.

Pair Corralation between Direxion Daily and Direxion Daily

Given the investment horizon of 90 days Direxion Daily Utilities is expected to generate 1.25 times more return on investment than Direxion Daily. However, Direxion Daily is 1.25 times more volatile than Direxion Daily Select. It trades about 0.28 of its potential returns per unit of risk. Direxion Daily Select is currently generating about 0.21 per unit of risk. If you would invest  2,438  in Direxion Daily Utilities on March 2, 2024 and sell it today you would earn a total of  410.00  from holding Direxion Daily Utilities or generate 16.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Direxion Daily Utilities  vs.  Direxion Daily Select

Direxion Daily Utilities

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Utilities are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Direxion Daily disclosed solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily Select

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Select are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Direxion Daily is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Direxion Daily and Direxion Daily

The main advantage of trading using opposite Direxion Daily and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily 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 Direxion Daily Utilities and Direxion Daily Select 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.