Correlation Between Direxion Daily and Adamjee Insurance

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

By analyzing existing cross correlation between Direxion Daily SP500 and Adamjee Insurance, you can compare the effects of market volatilities on Direxion Daily and Adamjee Insurance 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 Adamjee Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Adamjee Insurance.

Diversification Opportunities for Direxion Daily and Adamjee Insurance

0.3

Correlation Coefficient

Direxion Daily  Adamjee Insurance

Weak diversification

The 3 months correlation between Direxion and Adamjee is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP500 and Adamjee Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adamjee Insurance 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 SP500 are associated (or correlated) with Adamjee Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adamjee Insurance has no effect on the direction of Direxion Daily i.e., Direxion Daily and Adamjee Insurance go up and down completely randomly.

Pair Corralation between Direxion Daily and Adamjee Insurance

Given the investment horizon of 90 days Direxion Daily is expected to generate 2.92 times less return on investment than Adamjee Insurance. In addition to that, Direxion Daily is 2.28 times more volatile than Adamjee Insurance. It trades about 0.01 of its total potential returns per unit of risk. Adamjee Insurance is currently generating about 0.06 per unit of volatility. If you would invest  3,445  in Adamjee Insurance on June 18, 2024 and sell it today you would earn a total of  43.00  from holding Adamjee Insurance or generate 1.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Direxion Daily SP500  vs.  Adamjee Insurance

Direxion Daily SP500

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP500 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Direxion Daily is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Adamjee Insurance

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Adamjee Insurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Adamjee Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and Adamjee Insurance

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

The idea behind Direxion Daily SP500 and Adamjee Insurance 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.