Correlation Between Direxion Daily and FT Vest

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

Diversification Opportunities for Direxion Daily and FT Vest

-0.56

Correlation Coefficient

Direxion Daily  FT Vest

Excellent diversification

The 3 months correlation between Direxion and TDVI is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and FT Vest Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Technology 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 FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Technology has no effect on the direction of Direxion Daily i.e., Direxion Daily and FT Vest go up and down completely randomly.

Pair Corralation between Direxion Daily and FT Vest

Given the investment horizon of 90 days Direxion Daily SP is expected to generate 2.38 times more return on investment than FT Vest. However, Direxion Daily is 2.38 times more volatile than FT Vest Technology. It trades about -0.01 of its potential returns per unit of risk. FT Vest Technology is currently generating about -0.07 per unit of risk. If you would invest  1,105  in Direxion Daily SP on December 28, 2024 and sell it today you would lose (49.00) from holding Direxion Daily SP or give up 4.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Direxion Daily SP  vs.  FT Vest Technology

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.

FT Vest Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Vest Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Etf's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with Direxion Daily and FT Vest

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

The idea behind Direxion Daily SP and FT Vest Technology 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.