Correlation Between Direxion Daily and AXS 2X

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and AXS 2X 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 AXS 2X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Direxion Daily SP and AXS 2X Innovation, you can compare the effects of market volatilities on Direxion Daily and AXS 2X 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 AXS 2X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and AXS 2X.

Diversification Opportunities for Direxion Daily and AXS 2X

0.43

Correlation Coefficient

Direxion Daily  AXS 2X

Very weak diversification

The 3 months correlation between Direxion and AXS is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and AXS 2X Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXS 2X Innovation 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 SP are associated (or correlated) with AXS 2X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXS 2X Innovation has no effect on the direction of Direxion Daily i.e., Direxion Daily and AXS 2X go up and down completely randomly.

Pair Corralation between Direxion Daily and AXS 2X

Given the investment horizon of 90 days Direxion Daily SP is expected to generate 0.42 times more return on investment than AXS 2X. However, Direxion Daily SP is 2.41 times less risky than AXS 2X. It trades about 0.08 of its potential returns per unit of risk. AXS 2X Innovation is currently generating about 0.02 per unit of risk. If you would invest  2,618  in Direxion Daily SP on September 12, 2024 and sell it today you would earn a total of  337.00  from holding Direxion Daily SP or generate 12.87% return on investment over 90 days.

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

Direxion Daily SP  vs.  AXS 2X Innovation

Direxion Daily SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Direxion Daily demonstrated solid returns over the last few months and may actually be approaching a breakup point.

AXS 2X Innovation

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AXS 2X Innovation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, AXS 2X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Direxion Daily and AXS 2X

The main advantage of trading using opposite Direxion Daily and AXS 2X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, AXS 2X 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 AXS 2X will offset losses from the drop in AXS 2X's long position.

The idea behind Direxion Daily SP and AXS 2X Innovation 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.