Correlation Between Direxion Daily and Schwab Fundamental

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

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

Diversification Opportunities for Direxion Daily and Schwab Fundamental

-0.77

Correlation Coefficient

Direxion Daily  Schwab Fundamental

Pay attention - limited upside

The 3 months correlation between Direxion and Schwab is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Regional and Schwab Fundamental Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Fundamental and Direxion Daily 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 Daily Regional are associated (or correlated) with Schwab Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Fundamental has no effect on the direction of Direxion Daily i.e., Direxion Daily and Schwab Fundamental go up and down completely randomly.

Pair Corralation between Direxion Daily and Schwab Fundamental

Given the investment horizon of 90 days Direxion Daily Regional is expected to generate 8.23 times more return on investment than Schwab Fundamental. However, Direxion Daily is 8.23 times more volatile than Schwab Fundamental International. It trades about 0.13 of its potential returns per unit of risk. Schwab Fundamental International is currently generating about -0.05 per unit of risk. If you would invest  10,203  in Direxion Daily Regional on September 3, 2024 and sell it today you would earn a total of  5,441  from holding Direxion Daily Regional or generate 53.33% return on investment over 90 days.

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

Direxion Daily Regional  vs.  Schwab Fundamental Internation

Direxion Daily Regional

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Regional are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Schwab Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schwab Fundamental International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Schwab Fundamental 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 Daily and Schwab Fundamental

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

The idea behind Direxion Daily Regional and Schwab Fundamental International 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.