Correlation Between Direxion Daily and KraneShares Bosera

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

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

Diversification Opportunities for Direxion Daily and KraneShares Bosera

0.97

Correlation Coefficient

Direxion Daily  KraneShares Bosera

Almost no diversification

The 3 months correlation between Direxion and KraneShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily CSI and KraneShares Bosera MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Bosera MSCI 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 CSI are associated (or correlated) with KraneShares Bosera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Bosera MSCI has no effect on the direction of Direxion Daily i.e., Direxion Daily and KraneShares Bosera go up and down completely randomly.

Pair Corralation between Direxion Daily and KraneShares Bosera

Given the investment horizon of 90 days Direxion Daily CSI is expected to generate 2.04 times more return on investment than KraneShares Bosera. However, Direxion Daily is 2.04 times more volatile than KraneShares Bosera MSCI. It trades about -0.02 of its potential returns per unit of risk. KraneShares Bosera MSCI is currently generating about -0.08 per unit of risk. 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	Very Strong
Accuracy	95.45%
Values	Daily Returns

Direxion Daily CSI  vs.  KraneShares Bosera MSCI

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.

KraneShares Bosera MSCI

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Bosera MSCI are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, KraneShares Bosera sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and KraneShares Bosera

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

The idea behind Direxion Daily CSI and KraneShares Bosera MSCI 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.