Correlation Between Direxion Daily and Direxion Daily

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

By analyzing existing cross correlation between Direxion Daily SP500 and Direxion Daily Homebuilders, you can compare the effects of market volatilities on Direxion Daily 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 Direxion Daily with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Direxion Daily.

Diversification Opportunities for Direxion Daily and Direxion Daily

-0.41

Correlation Coefficient

Direxion Daily  Direxion Daily

Very good diversification

The 3 months correlation between Direxion and Direxion is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP500 and Direxion Daily Homebuilders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Homeb 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 SP500 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 Homeb has no effect on the direction of Direxion Daily i.e., Direxion Daily and Direxion Daily go up and down completely randomly.

Pair Corralation between Direxion Daily and Direxion Daily

Given the investment horizon of 90 days Direxion Daily is expected to generate 1.25 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Direxion Daily SP500 is 2.01 times less risky than Direxion Daily. It trades about 0.1 of its potential returns per unit of risk. Direxion Daily Homebuilders is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,502  in Direxion Daily Homebuilders on September 30, 2024 and sell it today you would earn a total of  5,065  from holding Direxion Daily Homebuilders or generate 144.63% 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 SP500  vs.  Direxion Daily Homebuilders

Direxion Daily SP500

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP500 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Direxion Daily Homeb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily Homebuilders has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's forward indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Pair Trading with Direxion Daily and Direxion Daily

The main advantage of trading using opposite Direxion Daily and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily 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 Direxion Daily SP500 and Direxion Daily Homebuilders 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.