Correlation Between Amazon and Direxion Daily

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

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

Diversification Opportunities for Amazon and Direxion Daily

-0.23

Correlation Coefficient

Amazon  Direxion Daily

Very good diversification

The 3 months correlation between Amazon and Direxion is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Direxion Daily MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily MSCI and Amazon 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 Amazon Inc 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 MSCI has no effect on the direction of Amazon i.e., Amazon and Direxion Daily go up and down completely randomly.

Pair Corralation between Amazon and Direxion Daily

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.6 times more return on investment than Direxion Daily. However, Amazon Inc is 1.66 times less risky than Direxion Daily. It trades about 0.19 of its potential returns per unit of risk. Direxion Daily MSCI is currently generating about -0.14 per unit of risk. If you would invest  19,578  in Amazon Inc on September 4, 2024 and sell it today you would earn a total of  1,493  from holding Amazon Inc or generate 7.63% return on investment over 90 days.

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

Amazon Inc  vs.  Direxion Daily MSCI

Amazon Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily MSCI

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily MSCI are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Direxion Daily is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Amazon and Direxion Daily

The main advantage of trading using opposite Amazon and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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 Amazon Inc and Direxion Daily MSCI 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..