Correlation Between VanEck Digital and Direxion Daily

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

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

Diversification Opportunities for VanEck Digital and Direxion Daily

-0.38

Correlation Coefficient

VanEck Digital  Direxion Daily

Very good diversification

The 3 months correlation between VanEck and Direxion is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Digital Transformation and Direxion Daily FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily FTSE and VanEck Digital 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 VanEck Digital Transformation 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 FTSE has no effect on the direction of VanEck Digital i.e., VanEck Digital and Direxion Daily go up and down completely randomly.

Pair Corralation between VanEck Digital and Direxion Daily

Given the investment horizon of 90 days VanEck Digital Transformation is expected to generate 0.52 times more return on investment than Direxion Daily. However, VanEck Digital Transformation is 1.91 times less risky than Direxion Daily. It trades about 0.2 of its potential returns per unit of risk. Direxion Daily FTSE is currently generating about -0.07 per unit of risk. If you would invest  1,069  in VanEck Digital Transformation on August 30, 2024 and sell it today you would earn a total of  765.00  from holding VanEck Digital Transformation or generate 71.56% return on investment over 90 days.

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

VanEck Digital Transformation  vs.  Direxion Daily FTSE

VanEck Digital Trans

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Digital Transformation are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, VanEck Digital reported solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily FTSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily FTSE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with VanEck Digital and Direxion Daily

The main advantage of trading using opposite VanEck Digital and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Digital 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 VanEck Digital Transformation and Direxion Daily FTSE 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.