Correlation Between Direxion Daily and Roundhill ETF

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

By analyzing existing cross correlation between Direxion Daily NVDA and Roundhill ETF Trust, you can compare the effects of market volatilities on Direxion Daily and Roundhill ETF 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 Roundhill ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Roundhill ETF.

Diversification Opportunities for Direxion Daily and Roundhill ETF

-0.44

Correlation Coefficient

Direxion Daily  Roundhill ETF

Very good diversification

The 3 months correlation between Direxion and Roundhill is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and Roundhill ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill ETF Trust 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 NVDA are associated (or correlated) with Roundhill ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill ETF Trust has no effect on the direction of Direxion Daily i.e., Direxion Daily and Roundhill ETF go up and down completely randomly.

Pair Corralation between Direxion Daily and Roundhill ETF

Given the investment horizon of 90 days Direxion Daily NVDA is expected to generate 8.53 times more return on investment than Roundhill ETF. However, Direxion Daily is 8.53 times more volatile than Roundhill ETF Trust. It trades about 0.16 of its potential returns per unit of risk. Roundhill ETF Trust is currently generating about -0.04 per unit of risk. If you would invest  7,573  in Direxion Daily NVDA on September 3, 2024 and sell it today you would earn a total of  4,040  from holding Direxion Daily NVDA or generate 53.35% return on investment over 90 days.

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

Direxion Daily NVDA  vs.  Roundhill ETF Trust

Direxion Daily NVDA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily NVDA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Roundhill ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roundhill ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Roundhill ETF is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Direxion Daily and Roundhill ETF

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

The idea behind Direxion Daily NVDA and Roundhill ETF Trust 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.