Correlation Between Direxion Daily and Booking Holdings

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

Diversification Opportunities for Direxion Daily and Booking Holdings

0.87

Correlation Coefficient

Direxion Daily  Booking Holdings

Very poor diversification

The 3 months correlation between Direxion and Booking is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings 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 Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Direxion Daily i.e., Direxion Daily and Booking Holdings go up and down completely randomly.

Pair Corralation between Direxion Daily and Booking Holdings

Given the investment horizon of 90 days Direxion Daily is expected to generate 1.45 times less return on investment than Booking Holdings. In addition to that, Direxion Daily is 1.75 times more volatile than Booking Holdings. It trades about 0.13 of its total potential returns per unit of risk. Booking Holdings is currently generating about 0.34 per unit of volatility. If you would invest  353,086  in Booking Holdings on September 13, 2024 and sell it today you would earn a total of  142,614  from holding Booking Holdings or generate 40.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.92%
Values	Daily Returns

Direxion Daily Mid  vs.  Booking Holdings

Direxion Daily Mid

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 10 (%) 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.

Booking Holdings

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Booking Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and Booking Holdings

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

The idea behind Direxion Daily Mid and Booking Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.