Correlation Between Direxion Daily and Direxion Daily

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

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

Diversification Opportunities for Direxion Daily and Direxion Daily

-0.38

Correlation Coefficient

Direxion Daily  Direxion Daily

Very good diversification

The 3 months correlation between Direxion and Direxion is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Junior and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP 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 Junior 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 SP has no effect on the direction of Direxion Daily i.e., Direxion Daily and Direxion Daily go up and down completely randomly.

Pair Corralation between Direxion Daily and Direxion Daily

Given the investment horizon of 90 days Direxion Daily is expected to generate 1.9 times less return on investment than Direxion Daily. In addition to that, Direxion Daily is 1.34 times more volatile than Direxion Daily SP. It trades about 0.03 of its total potential returns per unit of risk. Direxion Daily SP is currently generating about 0.08 per unit of volatility. 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Direxion Daily Junior  vs.  Direxion Daily SP

Direxion Daily Junior

Risk-Adjusted Performance

2 of 100

Weak

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

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.

Pair Trading with Direxion Daily and Direxion Daily

The main advantage of trading using opposite Direxion Daily and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily 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 Direxion Daily Junior and Direxion Daily SP 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 Anywhere module to track or share privately all of your investments from the convenience of any device.