Correlation Between IShares Expanded and Direxion Daily

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

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

Diversification Opportunities for IShares Expanded and Direxion Daily

-0.27

Correlation Coefficient

IShares Expanded  Direxion Daily

Very good diversification

The 3 months correlation between IShares and Direxion is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding iShares Expanded Tech Software and Direxion Daily Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Semic and IShares Expanded 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 iShares Expanded Tech Software are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Semic has no effect on the direction of IShares Expanded i.e., IShares Expanded and Direxion Daily go up and down completely randomly.

Pair Corralation between IShares Expanded and Direxion Daily

Considering the 90-day investment horizon iShares Expanded Tech Software is expected to generate 0.2 times more return on investment than Direxion Daily. However, iShares Expanded Tech Software is 5.01 times less risky than Direxion Daily. It trades about 0.24 of its potential returns per unit of risk. Direxion Daily Semiconductor is currently generating about -0.06 per unit of risk. If you would invest  8,680  in iShares Expanded Tech Software on August 30, 2024 and sell it today you would earn a total of  1,750  from holding iShares Expanded Tech Software or generate 20.16% return on investment over 90 days.

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

iShares Expanded Tech Software  vs.  Direxion Daily Semiconductor

iShares Expanded Tech

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Expanded Tech Software are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, IShares Expanded showed solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily Semic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Pair Trading with IShares Expanded and Direxion Daily

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

The idea behind iShares Expanded Tech Software and Direxion Daily Semiconductor 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.