Correlation Between Direxion Daily and Columbia Select
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Columbia Select 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 Columbia Select 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 Columbia Select Large, you can compare the effects of market volatilities on Direxion Daily and Columbia Select 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 Columbia Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Columbia Select.
Diversification Opportunities for Direxion Daily and Columbia Select
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Direxion and Columbia is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Columbia Select Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Select Large 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 Columbia Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Select Large has no effect on the direction of Direxion Daily i.e., Direxion Daily and Columbia Select go up and down completely randomly.
Pair Corralation between Direxion Daily and Columbia Select
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 3.91 times more return on investment than Columbia Select. However, Direxion Daily is 3.91 times more volatile than Columbia Select Large. It trades about 0.22 of its potential returns per unit of risk. Columbia Select Large is currently generating about 0.26 per unit of risk. If you would invest 4,627 in Direxion Daily Mid on September 6, 2024 and sell it today you would earn a total of 2,035 from holding Direxion Daily Mid or generate 43.98% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Direxion Daily Mid vs. Columbia Select Large
Performance |
Timeline |
Direxion Daily Mid |
Columbia Select Large |
Direxion Daily and Columbia Select Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Direxion Daily and Columbia Select
The main advantage of trading using opposite Direxion Daily and Columbia Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Columbia Select 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 Columbia Select will offset losses from the drop in Columbia Select's long position.Direxion Daily vs. Direxion Daily Retail | Direxion Daily vs. Direxion Daily Industrials | Direxion Daily vs. Direxion Daily Transportation | Direxion Daily vs. Direxion Daily FTSE |
Columbia Select vs. Columbia Large Cap | Columbia Select vs. Columbia Small Cap | Columbia Select vs. Columbia Large Cap | Columbia Select vs. Columbia Mid Cap |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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