Correlation Between Alcoa Corp and Direxion Daily

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

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

Diversification Opportunities for Alcoa Corp and Direxion Daily

-0.82

Correlation Coefficient

Alcoa Corp  Direxion Daily

Pay attention - limited upside

The 3 months correlation between Alcoa and Direxion is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp i.e., Alcoa Corp and Direxion Daily go up and down completely randomly.

Pair Corralation between Alcoa Corp and Direxion Daily

Allowing for the 90-day total investment horizon Alcoa Corp is expected to generate 0.83 times more return on investment than Direxion Daily. However, Alcoa Corp is 1.21 times less risky than Direxion Daily. It trades about 0.06 of its potential returns per unit of risk. Direxion Daily SP is currently generating about -0.06 per unit of risk. If you would invest  2,616  in Alcoa Corp on September 14, 2024 and sell it today you would earn a total of  1,296  from holding Alcoa Corp or generate 49.54% return on investment over 90 days.

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

Alcoa Corp  vs.  Direxion Daily SP

Alcoa Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alcoa Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Alcoa Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Etf's fundamental drivers 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 Alcoa Corp and Direxion Daily

The main advantage of trading using opposite Alcoa Corp and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp 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 Alcoa Corp 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.