Correlation Between Direxion Daily and UBS

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

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

Diversification Opportunities for Direxion Daily and UBS

0.64

Correlation Coefficient

Direxion Daily  UBS

Poor diversification

The 3 months correlation between Direxion and UBS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and UBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS 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 SP are associated (or correlated) with UBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS has no effect on the direction of Direxion Daily i.e., Direxion Daily and UBS go up and down completely randomly.

Pair Corralation between Direxion Daily and UBS

If you would invest  13,781  in Direxion Daily SP on September 15, 2024 and sell it today you would earn a total of  1,925  from holding Direxion Daily SP or generate 13.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Direxion Daily SP  vs.  UBS

Direxion Daily SP

Risk-Adjusted Performance

12 of 100

Good

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

UBS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UBS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, UBS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and UBS

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

The idea behind Direxion Daily SP and UBS 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.