Correlation Between Tidal Trust and Direxion Daily

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

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

Diversification Opportunities for Tidal Trust and Direxion Daily

-0.3

Correlation Coefficient

Tidal Trust  Direxion Daily

Very good diversification

The 3 months correlation between Tidal and Direxion is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Direxion Daily TSM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily TSM and Tidal Trust 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 Tidal Trust II 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 TSM has no effect on the direction of Tidal Trust i.e., Tidal Trust and Direxion Daily go up and down completely randomly.

Pair Corralation between Tidal Trust and Direxion Daily

Given the investment horizon of 90 days Tidal Trust II is expected to generate 0.42 times more return on investment than Direxion Daily. However, Tidal Trust II is 2.38 times less risky than Direxion Daily. It trades about 0.22 of its potential returns per unit of risk. Direxion Daily TSM is currently generating about -0.09 per unit of risk. If you would invest  1,455  in Tidal Trust II on October 10, 2024 and sell it today you would earn a total of  224.00  from holding Tidal Trust II or generate 15.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tidal Trust II  vs.  Direxion Daily TSM

Tidal Trust II

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Tidal Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily TSM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily TSM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Tidal Trust and Direxion Daily

The main advantage of trading using opposite Tidal Trust and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tidal Trust 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 Tidal Trust II and Direxion Daily TSM 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..