Correlation Between Direxion Daily and Invesco MSCI

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

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

Diversification Opportunities for Direxion Daily and Invesco MSCI

-0.31

Correlation Coefficient

Direxion Daily  Invesco MSCI

Very good diversification

The 3 months correlation between Direxion and Invesco is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Gold and Invesco MSCI Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco MSCI Global 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 Gold are associated (or correlated) with Invesco MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco MSCI Global has no effect on the direction of Direxion Daily i.e., Direxion Daily and Invesco MSCI go up and down completely randomly.

Pair Corralation between Direxion Daily and Invesco MSCI

Given the investment horizon of 90 days Direxion Daily Gold is expected to under-perform the Invesco MSCI. In addition to that, Direxion Daily is 4.29 times more volatile than Invesco MSCI Global. It trades about -0.03 of its total potential returns per unit of risk. Invesco MSCI Global is currently generating about 0.05 per unit of volatility. If you would invest  2,990  in Invesco MSCI Global on September 12, 2024 and sell it today you would earn a total of  441.00  from holding Invesco MSCI Global or generate 14.75% return on investment over 90 days.

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

Direxion Daily Gold  vs.  Invesco MSCI Global

Direxion Daily Gold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Gold are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco MSCI Global

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco MSCI Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Invesco MSCI is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Direxion Daily and Invesco MSCI

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

The idea behind Direxion Daily Gold and Invesco MSCI Global 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.