Correlation Between SPDR SP and Direxion Daily

Can any of the company-specific risk be diversified away by investing in both SPDR SP and Direxion Daily 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 SPDR SP and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPDR SP North and Direxion Daily Gold, you can compare the effects of market volatilities on SPDR SP and Direxion Daily 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 SPDR SP with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Direxion Daily.

Diversification Opportunities for SPDR SP and Direxion Daily

-0.22

Correlation Coefficient

SPDR SP  Direxion Daily

Very good diversification

The 3 months correlation between SPDR and Direxion is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP North and Direxion Daily Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Gold and SPDR SP 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 SPDR SP North are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Gold has no effect on the direction of SPDR SP i.e., SPDR SP and Direxion Daily go up and down completely randomly.

Pair Corralation between SPDR SP and Direxion Daily

Given the investment horizon of 90 days SPDR SP is expected to generate 2.44 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, SPDR SP North is 4.38 times less risky than Direxion Daily. It trades about 0.04 of its potential returns per unit of risk. Direxion Daily Gold is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,334  in Direxion Daily Gold on September 13, 2024 and sell it today you would earn a total of  25.00  from holding Direxion Daily Gold or generate 0.47% return on investment over 90 days.

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

SPDR SP North  vs.  Direxion Daily Gold

SPDR SP North

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP North are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Direxion Daily Gold

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Gold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Direxion Daily is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPDR SP and Direxion Daily

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

The idea behind SPDR SP North and Direxion Daily Gold 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..