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 Small and Direxion Daily Financial, 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

-0.69

Correlation Coefficient

Direxion Daily  Direxion Daily

Excellent diversification

The 3 months correlation between Direxion and Direxion is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Small and Direxion Daily Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Financial 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 Small 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 Financial 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

Considering the 90-day investment horizon Direxion Daily Small is expected to generate 1.99 times more return on investment than Direxion Daily. However, Direxion Daily is 1.99 times more volatile than Direxion Daily Financial. It trades about 0.01 of its potential returns per unit of risk. Direxion Daily Financial is currently generating about -0.28 per unit of risk. If you would invest  3,731  in Direxion Daily Small on June 9, 2024 and sell it today you would lose (26.00) from holding Direxion Daily Small or give up 0.7% of portfolio value over 90 days.

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

Direxion Daily Small  vs.  Direxion Daily Financial

Direxion Daily Small

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Small are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Direxion Daily Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in October 2024. The current disturbance may also be a sign of long term up-swing for the ETF investors.

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 Small and Direxion Daily Financial 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.