Correlation Between Direxion Daily and Saba Capital

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Saba Capital 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 Saba Capital 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 Saba Capital Income, you can compare the effects of market volatilities on Direxion Daily and Saba Capital 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 Saba Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Saba Capital.

Diversification Opportunities for Direxion Daily and Saba Capital

0.88

Correlation Coefficient

Direxion Daily  Saba Capital

Very poor diversification

The 3 months correlation between Direxion and Saba is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily AMZN and Saba Capital Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saba Capital Income 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 Saba Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saba Capital Income has no effect on the direction of Direxion Daily i.e., Direxion Daily and Saba Capital go up and down completely randomly.

Pair Corralation between Direxion Daily and Saba Capital

Given the investment horizon of 90 days Direxion Daily AMZN is expected to generate 3.24 times more return on investment than Saba Capital. However, Direxion Daily is 3.24 times more volatile than Saba Capital Income. It trades about 0.33 of its potential returns per unit of risk. Saba Capital Income is currently generating about 0.13 per unit of risk. If you would invest  3,528  in Direxion Daily AMZN on September 22, 2024 and sell it today you would earn a total of  942.00  from holding Direxion Daily AMZN or generate 26.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Direxion Daily AMZN  vs.  Saba Capital Income

Direxion Daily AMZN

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily AMZN are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Saba Capital Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saba Capital Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, Saba Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Direxion Daily and Saba Capital

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

The idea behind Direxion Daily AMZN and Saba Capital Income 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.