Correlation Between Global X and Direxion

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Can any of the company-specific risk be diversified away by investing in both Global X and Direxion 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 Global X and Direxion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global X Cybersecurity and Direxion, you can compare the effects of market volatilities on Global X and Direxion 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 Global X with a short position of Direxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Direxion.

Diversification Opportunities for Global X and Direxion

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between Global and Direxion is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Global X Cybersecurity and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion and Global X 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 Global X Cybersecurity are associated (or correlated) with Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of Global X i.e., Global X and Direxion go up and down completely randomly.

Pair Corralation between Global X and Direxion

Considering the 90-day investment horizon Global X Cybersecurity is expected to generate 0.58 times more return on investment than Direxion. However, Global X Cybersecurity is 1.73 times less risky than Direxion. It trades about 0.07 of its potential returns per unit of risk. Direxion is currently generating about 0.0 per unit of risk. If you would invest  2,115  in Global X Cybersecurity on October 7, 2024 and sell it today you would earn a total of  1,134  from holding Global X Cybersecurity or generate 53.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy76.61%
ValuesDaily Returns

Global X Cybersecurity  vs.  Direxion

 Performance 
       Timeline  
Global X Cybersecurity 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Global X Cybersecurity are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Direxion 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Direxion is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Global X and Direxion Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Global X and Direxion

The main advantage of trading using opposite Global X and Direxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X position performs unexpectedly, Direxion 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 will offset losses from the drop in Direxion's long position.
The idea behind Global X Cybersecurity and Direxion 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.
Check out your portfolio center.
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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