Correlation Between Disney and Direxion Daily

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

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

Diversification Opportunities for Disney and Direxion Daily

0.36

Correlation Coefficient

Disney  Direxion Daily

Weak diversification

The 3 months correlation between Disney and Direxion is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Direxion Daily Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Healthcare and Disney 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 Walt Disney 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 Healthcare has no effect on the direction of Disney i.e., Disney and Direxion Daily go up and down completely randomly.

Pair Corralation between Disney and Direxion Daily

Considering the 90-day investment horizon Walt Disney is expected to under-perform the Direxion Daily. But the stock apears to be less risky and, when comparing its historical volatility, Walt Disney is 2.15 times less risky than Direxion Daily. The stock trades about -0.09 of its potential returns per unit of risk. The Direxion Daily Healthcare is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,812  in Direxion Daily Healthcare on December 5, 2024 and sell it today you would earn a total of  713.00  from holding Direxion Daily Healthcare or generate 6.59% return on investment over 90 days.

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

Walt Disney  vs.  Direxion Daily Healthcare

Walt Disney

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walt Disney has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Disney is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Direxion Daily Healthcare

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Healthcare are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Disney and Direxion Daily

The main advantage of trading using opposite Disney and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 Walt Disney and Direxion Daily Healthcare 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.