Correlation Between Direxion Daily and MicroSectors Travel
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and MicroSectors Travel 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 MicroSectors Travel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Dow and MicroSectors Travel 3X, you can compare the effects of market volatilities on Direxion Daily and MicroSectors Travel 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 MicroSectors Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and MicroSectors Travel.
Diversification Opportunities for Direxion Daily and MicroSectors Travel
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Direxion and MicroSectors is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Dow and MicroSectors Travel 3X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Travel 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 Dow are associated (or correlated) with MicroSectors Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Travel has no effect on the direction of Direxion Daily i.e., Direxion Daily and MicroSectors Travel go up and down completely randomly.
Pair Corralation between Direxion Daily and MicroSectors Travel
Given the investment horizon of 90 days Direxion Daily Dow is expected to under-perform the MicroSectors Travel. But the etf apears to be less risky and, when comparing its historical volatility, Direxion Daily Dow is 1.1 times less risky than MicroSectors Travel. The etf trades about -0.34 of its potential returns per unit of risk. The MicroSectors Travel 3X is currently generating about -0.29 of returns per unit of risk over similar time horizon. If you would invest 2,804 in MicroSectors Travel 3X on September 14, 2024 and sell it today you would lose (1,379) from holding MicroSectors Travel 3X or give up 49.18% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Direxion Daily Dow vs. MicroSectors Travel 3X
Performance |
Timeline |
Direxion Daily Dow |
MicroSectors Travel |
Direxion Daily and MicroSectors Travel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Direxion Daily and MicroSectors Travel
The main advantage of trading using opposite Direxion Daily and MicroSectors Travel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, MicroSectors Travel 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 MicroSectors Travel will offset losses from the drop in MicroSectors Travel's long position.Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Dow | Direxion Daily vs. Direxion Daily Technology | Direxion Daily vs. Direxion Daily SP |
MicroSectors Travel vs. MicroSectors Travel 3X | MicroSectors Travel vs. MicroSectors Solactive FANG | MicroSectors Travel vs. MicroSectors Gold Miners | MicroSectors Travel vs. Direxion Daily Dow |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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