Correlation Between Vanguard Mid and Direxion Daily

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

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

Diversification Opportunities for Vanguard Mid and Direxion Daily

-0.96

Correlation Coefficient

Vanguard Mid  Direxion Daily

Pay attention - limited upside

The 3 months correlation between Vanguard and Direxion is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and Vanguard Mid 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 Vanguard Mid Cap Index 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 SP has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Direxion Daily go up and down completely randomly.

Pair Corralation between Vanguard Mid and Direxion Daily

Allowing for the 90-day total investment horizon Vanguard Mid Cap Index is expected to generate 0.33 times more return on investment than Direxion Daily. However, Vanguard Mid Cap Index is 3.07 times less risky than Direxion Daily. It trades about 0.28 of its potential returns per unit of risk. Direxion Daily SP is currently generating about -0.17 per unit of risk. If you would invest  25,203  in Vanguard Mid Cap Index on September 2, 2024 and sell it today you would earn a total of  3,260  from holding Vanguard Mid Cap Index or generate 12.93% return on investment over 90 days.

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

Vanguard Mid Cap Index  vs.  Direxion Daily SP

Vanguard Mid Cap

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vanguard Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Direxion Daily SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with Vanguard Mid and Direxion Daily

The main advantage of trading using opposite Vanguard Mid and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid 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 Vanguard Mid Cap Index and Direxion Daily SP 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.