Correlation Between EA Series and Direxion Daily

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

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

Diversification Opportunities for EA Series and Direxion Daily

-0.87

Correlation Coefficient

EA Series  Direxion Daily

Pay attention - limited upside

The 3 months correlation between DRLL and Direxion is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding EA Series Trust and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and EA Series 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 EA Series Trust 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 SP has no effect on the direction of EA Series i.e., EA Series and Direxion Daily go up and down completely randomly.

Pair Corralation between EA Series and Direxion Daily

Given the investment horizon of 90 days EA Series Trust is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, EA Series Trust is 2.33 times less risky than Direxion Daily. The etf trades about -0.06 of its potential returns per unit of risk. The Direxion Daily SP is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  916.00  in Direxion Daily SP on November 28, 2024 and sell it today you would earn a total of  175.00  from holding Direxion Daily SP or generate 19.1% return on investment over 90 days.

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

EA Series Trust  vs.  Direxion Daily SP

EA Series Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days EA Series Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, EA Series is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Direxion Daily SP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain forward indicators, Direxion Daily reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EA Series and Direxion Daily

The main advantage of trading using opposite EA Series and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EA Series 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 EA Series Trust and Direxion Daily SP 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.