Correlation Between Direxion Daily and Wells Fargo

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

Diversification Opportunities for Direxion Daily and Wells Fargo

0.78

Correlation Coefficient

Direxion Daily  Wells Fargo

Poor diversification

The 3 months correlation between Direxion and Wells is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Wells Fargo Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Alternative 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Alternative has no effect on the direction of Direxion Daily i.e., Direxion Daily and Wells Fargo go up and down completely randomly.

Pair Corralation between Direxion Daily and Wells Fargo

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Wells Fargo. In addition to that, Direxion Daily is 7.55 times more volatile than Wells Fargo Alternative. It trades about -0.01 of its total potential returns per unit of risk. Wells Fargo Alternative is currently generating about 0.51 per unit of volatility. If you would invest  816.00  in Wells Fargo Alternative on September 13, 2024 and sell it today you would earn a total of  28.00  from holding Wells Fargo Alternative or generate 3.43% return on investment over 90 days.

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

Direxion Daily Mid  vs.  Wells Fargo Alternative

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.

Wells Fargo Alternative

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Alternative are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Wells Fargo 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 Wells Fargo

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

The idea behind Direxion Daily Mid and Wells Fargo Alternative 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.