Correlation Between Direxion Daily and Bridge Builder

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

Diversification Opportunities for Direxion Daily and Bridge Builder

-0.61

Correlation Coefficient

Direxion Daily  Bridge Builder

Excellent diversification

The 3 months correlation between Direxion and Bridge is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Bridge Builder E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridge Builder E 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 Bridge Builder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridge Builder E has no effect on the direction of Direxion Daily i.e., Direxion Daily and Bridge Builder go up and down completely randomly.

Pair Corralation between Direxion Daily and Bridge Builder

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 9.28 times more return on investment than Bridge Builder. However, Direxion Daily is 9.28 times more volatile than Bridge Builder E. It trades about 0.18 of its potential returns per unit of risk. Bridge Builder E is currently generating about -0.04 per unit of risk. If you would invest  4,993  in Direxion Daily Mid on September 3, 2024 and sell it today you would earn a total of  1,739  from holding Direxion Daily Mid or generate 34.83% return on investment over 90 days.

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

Direxion Daily Mid  vs.  Bridge Builder E

Direxion Daily Mid

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 14 (%) 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.

Bridge Builder E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bridge Builder E has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Bridge Builder is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and Bridge Builder

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

The idea behind Direxion Daily Mid and Bridge Builder E 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.