Correlation Between DSJA and Direxion

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

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

Diversification Opportunities for DSJA and Direxion

-0.85

Correlation Coefficient

DSJA  Direxion

Pay attention - limited upside

The 3 months correlation between DSJA and Direxion is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding DSJA and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion and DSJA 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 DSJA are associated (or correlated) with Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of DSJA i.e., DSJA and Direxion go up and down completely randomly.

Pair Corralation between DSJA and Direxion

Given the investment horizon of 90 days DSJA is expected to generate 0.14 times more return on investment than Direxion. However, DSJA is 7.23 times less risky than Direxion. It trades about 0.21 of its potential returns per unit of risk. Direxion is currently generating about -0.01 per unit of risk. If you would invest  2,396  in DSJA on September 22, 2024 and sell it today you would earn a total of  469.00  from holding DSJA or generate 19.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	60.0%
Values	Daily Returns

DSJA  vs.  Direxion

DSJA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DSJA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, DSJA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Direxion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Direxion is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DSJA and Direxion

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

The idea behind DSJA and Direxion 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.