Correlation Between Direxion Daily and VanEck Gold

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and VanEck Gold 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 VanEck Gold 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 VanEck Gold Miners, you can compare the effects of market volatilities on Direxion Daily and VanEck Gold 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 VanEck Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and VanEck Gold.

Diversification Opportunities for Direxion Daily and VanEck Gold

-0.99

Correlation Coefficient

Direxion Daily  VanEck Gold

Pay attention - limited upside

The 3 months correlation between Direxion and VanEck is -0.99. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Gold and VanEck Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Gold Miners 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 VanEck Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Gold Miners has no effect on the direction of Direxion Daily i.e., Direxion Daily and VanEck Gold go up and down completely randomly.

Pair Corralation between Direxion Daily and VanEck Gold

Given the investment horizon of 90 days Direxion Daily Gold is expected to generate 2.02 times more return on investment than VanEck Gold. However, Direxion Daily is 2.02 times more volatile than VanEck Gold Miners. It trades about 0.03 of its potential returns per unit of risk. VanEck Gold Miners is currently generating about -0.02 per unit of risk. If you would invest  5,584  in Direxion Daily Gold on September 12, 2024 and sell it today you would earn a total of  126.00  from holding Direxion Daily Gold or generate 2.26% return on investment over 90 days.

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

Direxion Daily Gold  vs.  VanEck Gold Miners

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.

VanEck Gold Miners

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days VanEck Gold Miners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, VanEck Gold is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and VanEck Gold

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

The idea behind Direxion Daily Gold and VanEck Gold Miners 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.