Correlation Between Direxion Daily and Goldman Sachs

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

By analyzing existing cross correlation between Direxion Daily AMZN and Goldman Sachs SP, you can compare the effects of market volatilities on Direxion Daily and Goldman Sachs 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 Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Goldman Sachs.

Diversification Opportunities for Direxion Daily and Goldman Sachs

0.87

Correlation Coefficient

Direxion Daily  Goldman Sachs

Very poor diversification

The 3 months correlation between Direxion and Goldman is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily AMZN and Goldman Sachs SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs SP 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 AMZN are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs SP has no effect on the direction of Direxion Daily i.e., Direxion Daily and Goldman Sachs go up and down completely randomly.

Pair Corralation between Direxion Daily and Goldman Sachs

Given the investment horizon of 90 days Direxion Daily AMZN is expected to generate 4.36 times more return on investment than Goldman Sachs. However, Direxion Daily is 4.36 times more volatile than Goldman Sachs SP. It trades about 0.07 of its potential returns per unit of risk. Goldman Sachs SP is currently generating about -0.11 per unit of risk. If you would invest  4,035  in Direxion Daily AMZN on October 4, 2024 and sell it today you would earn a total of  167.00  from holding Direxion Daily AMZN or generate 4.14% return on investment over 90 days.

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

Direxion Daily AMZN  vs.  Goldman Sachs SP

Direxion Daily AMZN

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily AMZN are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Goldman Sachs is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and Goldman Sachs

The main advantage of trading using opposite Direxion Daily and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.

The idea behind Direxion Daily AMZN and Goldman Sachs 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.