Correlation Between Direxion Auspice and IShares SP

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

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

Diversification Opportunities for Direxion Auspice and IShares SP

0.52

Correlation Coefficient

Direxion Auspice  IShares SP

Very weak diversification

The 3 months correlation between Direxion and IShares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Auspice Broad and iShares SP GSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP GSCI and Direxion Auspice 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 Auspice Broad are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP GSCI has no effect on the direction of Direxion Auspice i.e., Direxion Auspice and IShares SP go up and down completely randomly.

Pair Corralation between Direxion Auspice and IShares SP

Considering the 90-day investment horizon Direxion Auspice is expected to generate 2.56 times less return on investment than IShares SP. But when comparing it to its historical volatility, Direxion Auspice Broad is 3.59 times less risky than IShares SP. It trades about 0.09 of its potential returns per unit of risk. iShares SP GSCI is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,043  in iShares SP GSCI on September 12, 2024 and sell it today you would earn a total of  81.00  from holding iShares SP GSCI or generate 3.96% return on investment over 90 days.

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

Direxion Auspice Broad  vs.  iShares SP GSCI

Direxion Auspice Broad

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Auspice Broad are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Direxion Auspice is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

iShares SP GSCI

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP GSCI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Direxion Auspice and IShares SP

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

The idea behind Direxion Auspice Broad and iShares SP GSCI 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.