Correlation Between Direxion Daily and Defiance Daily

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

Diversification Opportunities for Direxion Daily and Defiance Daily

-0.93

Correlation Coefficient

Direxion Daily  Defiance Daily

Pay attention - limited upside

The 3 months correlation between Direxion and Defiance is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and Defiance Daily Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Daily Target 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 Defiance Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Daily Target has no effect on the direction of Direxion Daily i.e., Direxion Daily and Defiance Daily go up and down completely randomly.

Pair Corralation between Direxion Daily and Defiance Daily

Given the investment horizon of 90 days Direxion Daily is expected to generate 1.45 times less return on investment than Defiance Daily. But when comparing it to its historical volatility, Direxion Daily NVDA is 7.11 times less risky than Defiance Daily. It trades about 0.16 of its potential returns per unit of risk. Defiance Daily Target is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,149  in Defiance Daily Target on September 1, 2024 and sell it today you would lose (1,538) from holding Defiance Daily Target or give up 71.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Direxion Daily NVDA  vs.  Defiance Daily Target

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 uncertain fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Defiance Daily Target

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Daily Target are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Defiance Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and Defiance Daily

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

The idea behind Direxion Daily NVDA and Defiance Daily Target 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.