Correlation Between Direxion Shares and Innovator Capital

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

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

Diversification Opportunities for Direxion Shares and Innovator Capital

-0.44

Correlation Coefficient

Direxion Shares  Innovator Capital

Very good diversification

The 3 months correlation between Direxion and Innovator is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Shares ETF and Innovator Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Capital and Direxion Shares 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 Shares ETF are associated (or correlated) with Innovator Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Capital has no effect on the direction of Direxion Shares i.e., Direxion Shares and Innovator Capital go up and down completely randomly.

Pair Corralation between Direxion Shares and Innovator Capital

Given the investment horizon of 90 days Direxion Shares ETF is expected to under-perform the Innovator Capital. In addition to that, Direxion Shares is 1.17 times more volatile than Innovator Capital Management. It trades about -0.08 of its total potential returns per unit of risk. Innovator Capital Management is currently generating about 0.06 per unit of volatility. If you would invest  2,161  in Innovator Capital Management on September 14, 2024 and sell it today you would earn a total of  731.00  from holding Innovator Capital Management or generate 33.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.28%
Values	Daily Returns

Direxion Shares ETF  vs.  Innovator Capital Management

Direxion Shares ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Shares ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Innovator Capital

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Innovator Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak essential indicators, Innovator Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Direxion Shares and Innovator Capital

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

The idea behind Direxion Shares ETF and Innovator Capital Management 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.