Correlation Between Xtrackers Harvest and Direxion Daily

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

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

Diversification Opportunities for Xtrackers Harvest and Direxion Daily

0.82

Correlation Coefficient

Xtrackers Harvest  Direxion Daily

Very poor diversification

The 3 months correlation between Xtrackers and Direxion is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Harvest CSI and Direxion Daily CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily CSI and Xtrackers Harvest 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 Xtrackers Harvest CSI 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 CSI has no effect on the direction of Xtrackers Harvest i.e., Xtrackers Harvest and Direxion Daily go up and down completely randomly.

Pair Corralation between Xtrackers Harvest and Direxion Daily

Given the investment horizon of 90 days Xtrackers Harvest CSI is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, Xtrackers Harvest CSI is 1.92 times less risky than Direxion Daily. The etf trades about -0.04 of its potential returns per unit of risk. The Direxion Daily CSI is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,572  in Direxion Daily CSI on September 19, 2024 and sell it today you would lose (54.00) from holding Direxion Daily CSI or give up 3.44% of portfolio value over 90 days.

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

Xtrackers Harvest CSI  vs.  Direxion Daily CSI

Xtrackers Harvest CSI

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Harvest CSI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical indicators, Xtrackers Harvest reported solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily CSI

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily CSI are ranked lower than 6 (%) 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.

Pair Trading with Xtrackers Harvest and Direxion Daily

The main advantage of trading using opposite Xtrackers Harvest and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers Harvest 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 Xtrackers Harvest CSI and Direxion Daily CSI 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.