Correlation Between InfraCap MLP and Direxion Daily

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

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

Diversification Opportunities for InfraCap MLP and Direxion Daily

-0.78

Correlation Coefficient

InfraCap MLP  Direxion Daily

Pay attention - limited upside

The 3 months correlation between InfraCap and Direxion is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding InfraCap MLP ETF 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 InfraCap MLP 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 InfraCap MLP 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 SP has no effect on the direction of InfraCap MLP i.e., InfraCap MLP and Direxion Daily go up and down completely randomly.

Pair Corralation between InfraCap MLP and Direxion Daily

Given the investment horizon of 90 days InfraCap MLP ETF is expected to generate 0.41 times more return on investment than Direxion Daily. However, InfraCap MLP ETF is 2.42 times less risky than Direxion Daily. It trades about 0.14 of its potential returns per unit of risk. Direxion Daily SP is currently generating about -0.08 per unit of risk. If you would invest  3,967  in InfraCap MLP ETF on September 12, 2024 and sell it today you would earn a total of  452.00  from holding InfraCap MLP ETF or generate 11.39% return on investment over 90 days.

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

InfraCap MLP ETF  vs.  Direxion Daily SP

InfraCap MLP ETF

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in InfraCap MLP ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, InfraCap MLP 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. Even with uncertain performance in the last few months, the Etf's forward indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with InfraCap MLP and Direxion Daily

The main advantage of trading using opposite InfraCap MLP and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InfraCap MLP 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 InfraCap MLP ETF 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.