Correlation Between Direxion Daily and Harbor Health

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

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

Diversification Opportunities for Direxion Daily and Harbor Health

0.39

Correlation Coefficient

Direxion Daily  Harbor Health

Weak diversification

The 3 months correlation between Direxion and Harbor is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and Harbor Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Health Care 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 SP are associated (or correlated) with Harbor Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Health Care has no effect on the direction of Direxion Daily i.e., Direxion Daily and Harbor Health go up and down completely randomly.

Pair Corralation between Direxion Daily and Harbor Health

Given the investment horizon of 90 days Direxion Daily SP is expected to under-perform the Harbor Health. In addition to that, Direxion Daily is 3.0 times more volatile than Harbor Health Care. It trades about -0.04 of its total potential returns per unit of risk. Harbor Health Care is currently generating about -0.03 per unit of volatility. If you would invest  2,756  in Harbor Health Care on August 30, 2024 and sell it today you would lose (66.00) from holding Harbor Health Care or give up 2.39% of portfolio value over 90 days.

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

Direxion Daily SP  vs.  Harbor Health Care

Direxion Daily SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily SP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Etf's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Harbor Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbor Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Harbor Health is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Direxion Daily and Harbor Health

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

The idea behind Direxion Daily SP and Harbor Health Care 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.