Correlation Between Visa and Direxion Daily

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

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

Diversification Opportunities for Visa and Direxion Daily

0.44

Correlation Coefficient

Visa  Direxion Daily

Very weak diversification

The 3 months correlation between Visa and Direxion is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Direxion Daily Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Mid and Visa 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 Visa Class A 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 Mid has no effect on the direction of Visa i.e., Visa and Direxion Daily go up and down completely randomly.

Pair Corralation between Visa and Direxion Daily

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.25 times more return on investment than Direxion Daily. However, Visa Class A is 3.94 times less risky than Direxion Daily. It trades about -0.24 of its potential returns per unit of risk. Direxion Daily Mid is currently generating about -0.15 per unit of risk. If you would invest  27,844  in Visa Class A on February 2, 2024 and sell it today you would lose (1,083) from holding Visa Class A or give up 3.89% of portfolio value over 90 days.

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

Visa Class A  vs.  Direxion Daily Mid

Visa Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Visa Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Visa is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Direxion Daily Mid

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Direxion Daily

The main advantage of trading using opposite Visa and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A and Direxion Daily Mid 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 Transaction History module to view history of all your transactions and understand their impact on performance.