Correlation Between Citigroup and Direxion Daily

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

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

Diversification Opportunities for Citigroup and Direxion Daily

-0.2

Correlation Coefficient

Citigroup  Direxion Daily

Good diversification

The 3 months correlation between Citigroup and Direxion is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup 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 Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Direxion Daily go up and down completely randomly.

Pair Corralation between Citigroup and Direxion Daily

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.55 times more return on investment than Direxion Daily. However, Citigroup is 1.8 times less risky than Direxion Daily. It trades about 0.14 of its potential returns per unit of risk. Direxion Daily MSCI is currently generating about 0.02 per unit of risk. If you would invest  6,042  in Citigroup on September 4, 2024 and sell it today you would earn a total of  1,097  from holding Citigroup or generate 18.16% return on investment over 90 days.

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

Citigroup  vs.  Direxion Daily MSCI

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited 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 Citigroup and Direxion Daily

The main advantage of trading using opposite Citigroup and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.