Correlation Between Direxion Daily and IShares Global

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

Diversification Opportunities for Direxion Daily and IShares Global

-0.37

Correlation Coefficient

Direxion Daily  IShares Global

Very good diversification

The 3 months correlation between Direxion and IShares is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Gold and iShares Global Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Timber 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 IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Timber has no effect on the direction of Direxion Daily i.e., Direxion Daily and IShares Global go up and down completely randomly.

Pair Corralation between Direxion Daily and IShares Global

Given the investment horizon of 90 days Direxion Daily Gold is expected to generate 3.99 times more return on investment than IShares Global. However, Direxion Daily is 3.99 times more volatile than iShares Global Timber. It trades about 0.02 of its potential returns per unit of risk. iShares Global Timber is currently generating about -0.04 per unit of risk. If you would invest  5,334  in Direxion Daily Gold on September 13, 2024 and sell it today you would earn a total of  25.00  from holding Direxion Daily Gold or generate 0.47% 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.  iShares Global Timber

Direxion Daily Gold

Risk-Adjusted Performance

1 of 100

Weak

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

iShares Global Timber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Timber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares Global is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Direxion Daily and IShares Global

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

The idea behind Direxion Daily Gold and iShares Global Timber 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.