Correlation Between Direxion Daily and IShares Semiconductor

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

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

Diversification Opportunities for Direxion Daily and IShares Semiconductor

0.96

Correlation Coefficient

Direxion Daily  IShares Semiconductor

Almost no diversification

The 3 months correlation between Direxion and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Semiconductor and iShares Semiconductor ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Semiconductor ETF 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 Semiconductor are associated (or correlated) with IShares Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Semiconductor ETF has no effect on the direction of Direxion Daily i.e., Direxion Daily and IShares Semiconductor go up and down completely randomly.

Pair Corralation between Direxion Daily and IShares Semiconductor

Given the investment horizon of 90 days Direxion Daily Semiconductor is expected to under-perform the IShares Semiconductor. In addition to that, Direxion Daily is 2.97 times more volatile than iShares Semiconductor ETF. It trades about 0.0 of its total potential returns per unit of risk. iShares Semiconductor ETF is currently generating about 0.01 per unit of volatility. If you would invest  21,298  in iShares Semiconductor ETF on August 31, 2024 and sell it today you would lose (42.00) from holding iShares Semiconductor ETF or give up 0.2% of portfolio value over 90 days.

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

Direxion Daily Semiconductor  vs.  iShares Semiconductor ETF

Direxion Daily Semic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Direxion Daily is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

iShares Semiconductor ETF

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Direxion Daily and IShares Semiconductor

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

The idea behind Direxion Daily Semiconductor and iShares Semiconductor ETF 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.