Correlation Between BlackRock Science and Direxion Daily

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

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

Diversification Opportunities for BlackRock Science and Direxion Daily

0.87

Correlation Coefficient

BlackRock Science  Direxion Daily

Very poor diversification

The 3 months correlation between BlackRock and Direxion is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock Science Tech and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and BlackRock Science 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 BlackRock Science Tech 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 SP has no effect on the direction of BlackRock Science i.e., BlackRock Science and Direxion Daily go up and down completely randomly.

Pair Corralation between BlackRock Science and Direxion Daily

Considering the 90-day investment horizon BlackRock Science is expected to generate 3.33 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, BlackRock Science Tech is 4.05 times less risky than Direxion Daily. It trades about 0.11 of its potential returns per unit of risk. Direxion Daily SP is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,089  in Direxion Daily SP on August 30, 2024 and sell it today you would earn a total of  776.00  from holding Direxion Daily SP or generate 18.98% return on investment over 90 days.

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

BlackRock Science Tech  vs.  Direxion Daily SP

BlackRock Science Tech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock Science Tech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, BlackRock Science may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Direxion Daily SP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Direxion Daily disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlackRock Science and Direxion Daily

The main advantage of trading using opposite BlackRock Science and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock Science 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 BlackRock Science Tech and Direxion Daily SP 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.