Correlation Between Direxion Daily and Money Market

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

Diversification Opportunities for Direxion Daily and Money Market

0.61
  Correlation Coefficient

Poor diversification

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

Pair Corralation between Direxion Daily and Money Market

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 21.65 times more return on investment than Money Market. However, Direxion Daily is 21.65 times more volatile than Money Market Obligations. It trades about 0.22 of its potential returns per unit of risk. Money Market Obligations is currently generating about 0.13 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 Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.44%
ValuesDaily Returns

Direxion Daily Mid  vs.  Money Market Obligations

 Performance 
       Timeline  
Direxion Daily Mid 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 17 (%) 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.
Money Market Obligations 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Money Market Obligations are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Money Market is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Direxion Daily and Money Market Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Direxion Daily and Money Market

The main advantage of trading using opposite Direxion Daily and Money Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Money Market 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 Money Market will offset losses from the drop in Money Market's long position.
The idea behind Direxion Daily Mid and Money Market Obligations 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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