Correlation Between SPDR Portfolio and Direxion

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

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

Diversification Opportunities for SPDR Portfolio and Direxion

0.0

Correlation Coefficient

SPDR Portfolio  Direxion

Pay attention - limited upside

The 3 months correlation between SPDR and Direxion is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Portfolio Aggregate and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion and SPDR Portfolio 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 Portfolio Aggregate are associated (or correlated) with Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of SPDR Portfolio i.e., SPDR Portfolio and Direxion go up and down completely randomly.

Pair Corralation between SPDR Portfolio and Direxion

If you would invest (100.00) in Direxion on October 1, 2024 and sell it today you would earn a total of  100.00  from holding Direxion or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

SPDR Portfolio Aggregate  vs.  Direxion

SPDR Portfolio Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Portfolio Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Direxion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Direxion is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with SPDR Portfolio and Direxion

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

The idea behind SPDR Portfolio Aggregate and Direxion 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.