Correlation Between Direxion Daily and CBAAU

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and CBAAU 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 CBAAU 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 CBAAU 1125 15 JUN 26, you can compare the effects of market volatilities on Direxion Daily and CBAAU 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 CBAAU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and CBAAU.

Diversification Opportunities for Direxion Daily and CBAAU

0.19

Correlation Coefficient

Direxion Daily  CBAAU

Average diversification

The 3 months correlation between Direxion and CBAAU is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and CBAAU 1125 15 JUN 26 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBAAU 1125 15 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 CBAAU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBAAU 1125 15 has no effect on the direction of Direxion Daily i.e., Direxion Daily and CBAAU go up and down completely randomly.

Pair Corralation between Direxion Daily and CBAAU

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 2.67 times more return on investment than CBAAU. However, Direxion Daily is 2.67 times more volatile than CBAAU 1125 15 JUN 26. It trades about 0.29 of its potential returns per unit of risk. CBAAU 1125 15 JUN 26 is currently generating about -0.4 per unit of risk. If you would invest  5,385  in Direxion Daily Mid on September 5, 2024 and sell it today you would earn a total of  1,235  from holding Direxion Daily Mid or generate 22.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	61.9%
Values	Daily Returns

Direxion Daily Mid  vs.  CBAAU 1125 15 JUN 26

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.

CBAAU 1125 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBAAU 1125 15 JUN 26 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for CBAAU 1125 15 JUN 26 investors.

Pair Trading with Direxion Daily and CBAAU

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

The idea behind Direxion Daily Mid and CBAAU 1125 15 JUN 26 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.