Correlation Between Direxion Daily and Horizon Kinetics

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Horizon Kinetics 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 Horizon Kinetics 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 Horizon Kinetics Medical, you can compare the effects of market volatilities on Direxion Daily and Horizon Kinetics 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 Horizon Kinetics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Horizon Kinetics.

Diversification Opportunities for Direxion Daily and Horizon Kinetics

0.54

Correlation Coefficient

Direxion Daily  Horizon Kinetics

Very weak diversification

The 3 months correlation between Direxion and Horizon is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and Horizon Kinetics Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Kinetics Medical 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 Horizon Kinetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Kinetics Medical has no effect on the direction of Direxion Daily i.e., Direxion Daily and Horizon Kinetics go up and down completely randomly.

Pair Corralation between Direxion Daily and Horizon Kinetics

Given the investment horizon of 90 days Direxion Daily is expected to generate 18.31 times less return on investment than Horizon Kinetics. In addition to that, Direxion Daily is 3.56 times more volatile than Horizon Kinetics Medical. It trades about 0.0 of its total potential returns per unit of risk. Horizon Kinetics Medical is currently generating about 0.11 per unit of volatility. If you would invest  2,612  in Horizon Kinetics Medical on December 30, 2024 and sell it today you would earn a total of  152.00  from holding Horizon Kinetics Medical or generate 5.82% return on investment over 90 days.

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

Direxion Daily SP  vs.  Horizon Kinetics Medical

Direxion Daily SP

Risk-Adjusted Performance

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 relatively invariable forward indicators, Direxion Daily is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Horizon Kinetics Medical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Kinetics Medical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Horizon Kinetics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and Horizon Kinetics

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

The idea behind Direxion Daily SP and Horizon Kinetics Medical 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.