Correlation Between Direxion Shares and Direxion Daily

Can any of the company-specific risk be diversified away by investing in both Direxion Shares 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 Shares 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 Shares ETF and Direxion Daily MSFT, you can compare the effects of market volatilities on Direxion Shares 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 Shares with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Shares and Direxion Daily.

Diversification Opportunities for Direxion Shares and Direxion Daily

0.53

Correlation Coefficient

Direxion Shares  Direxion Daily

Very weak diversification

The 3 months correlation between Direxion and Direxion is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Shares ETF and Direxion Daily MSFT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily MSFT and Direxion Shares 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 Shares ETF 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 MSFT has no effect on the direction of Direxion Shares i.e., Direxion Shares and Direxion Daily go up and down completely randomly.

Pair Corralation between Direxion Shares and Direxion Daily

Given the investment horizon of 90 days Direxion Shares ETF is expected to generate 1.14 times more return on investment than Direxion Daily. However, Direxion Shares is 1.14 times more volatile than Direxion Daily MSFT. It trades about 0.14 of its potential returns per unit of risk. Direxion Daily MSFT is currently generating about 0.11 per unit of risk. If you would invest  1,486  in Direxion Shares ETF on December 27, 2024 and sell it today you would earn a total of  224.00  from holding Direxion Shares ETF or generate 15.07% return on investment over 90 days.

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

Direxion Shares ETF  vs.  Direxion Daily MSFT

Direxion Shares ETF

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Shares ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Direxion Shares exhibited solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily MSFT

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily MSFT are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Direxion Shares and Direxion Daily

The main advantage of trading using opposite Direxion Shares and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Shares 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 Shares ETF and Direxion Daily MSFT 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.