Correlation Between Direxion Daily and DAEA TI

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

By analyzing existing cross correlation between Direxion Daily Mid and DAEA TI Co, you can compare the effects of market volatilities on Direxion Daily and DAEA TI 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 DAEA TI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and DAEA TI.

Diversification Opportunities for Direxion Daily and DAEA TI

0.63

Correlation Coefficient

Direxion Daily  DAEA TI

Poor diversification

The 3 months correlation between Direxion and DAEA is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and DAEA TI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAEA TI 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 Mid are associated (or correlated) with DAEA TI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAEA TI has no effect on the direction of Direxion Daily i.e., Direxion Daily and DAEA TI go up and down completely randomly.

Pair Corralation between Direxion Daily and DAEA TI

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 1.08 times more return on investment than DAEA TI. However, Direxion Daily is 1.08 times more volatile than DAEA TI Co. It trades about 0.16 of its potential returns per unit of risk. DAEA TI Co is currently generating about 0.09 per unit of risk. If you would invest  4,835  in Direxion Daily Mid on September 12, 2024 and sell it today you would earn a total of  1,433  from holding Direxion Daily Mid or generate 29.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Direxion Daily Mid  vs.  DAEA TI Co

Direxion Daily Mid

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

DAEA TI

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DAEA TI Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DAEA TI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and DAEA TI

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

The idea behind Direxion Daily Mid and DAEA TI Co 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.