Correlation Between Direxion Daily and ETRACS 2xMonthly

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and ETRACS 2xMonthly 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 ETRACS 2xMonthly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Direxion Daily Regional and ETRACS 2xMonthly Pay, you can compare the effects of market volatilities on Direxion Daily and ETRACS 2xMonthly 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 ETRACS 2xMonthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and ETRACS 2xMonthly.

Diversification Opportunities for Direxion Daily and ETRACS 2xMonthly

0.42

Correlation Coefficient

Direxion Daily  ETRACS 2xMonthly

Very weak diversification

The 3 months correlation between Direxion and ETRACS is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Regional and ETRACS 2xMonthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS 2xMonthly Pay 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 Regional are associated (or correlated) with ETRACS 2xMonthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS 2xMonthly Pay has no effect on the direction of Direxion Daily i.e., Direxion Daily and ETRACS 2xMonthly go up and down completely randomly.

Pair Corralation between Direxion Daily and ETRACS 2xMonthly

Given the investment horizon of 90 days Direxion Daily Regional is expected to under-perform the ETRACS 2xMonthly. In addition to that, Direxion Daily is 1.86 times more volatile than ETRACS 2xMonthly Pay. It trades about -0.05 of its total potential returns per unit of risk. ETRACS 2xMonthly Pay is currently generating about 0.0 per unit of volatility. If you would invest  485.00  in ETRACS 2xMonthly Pay on December 29, 2024 and sell it today you would lose (8.00) from holding ETRACS 2xMonthly Pay or give up 1.65% of portfolio value over 90 days.

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

Direxion Daily Regional  vs.  ETRACS 2xMonthly Pay

Direxion Daily Regional

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily Regional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

ETRACS 2xMonthly Pay

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETRACS 2xMonthly Pay has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, ETRACS 2xMonthly is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and ETRACS 2xMonthly

The main advantage of trading using opposite Direxion Daily and ETRACS 2xMonthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, ETRACS 2xMonthly 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 ETRACS 2xMonthly will offset losses from the drop in ETRACS 2xMonthly's long position.

The idea behind Direxion Daily Regional and ETRACS 2xMonthly Pay 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.