Correlation Between DSJA and Direxion Daily

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

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

Diversification Opportunities for DSJA and Direxion Daily

-0.34

Correlation Coefficient

DSJA  Direxion Daily

Very good diversification

The 3 months correlation between DSJA and Direxion is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding DSJA and Direxion Daily Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Aerospace and DSJA 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 DSJA 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 Aerospace has no effect on the direction of DSJA i.e., DSJA and Direxion Daily go up and down completely randomly.

Pair Corralation between DSJA and Direxion Daily

If you would invest  1,273  in Direxion Daily Aerospace on September 26, 2024 and sell it today you would earn a total of  1,627  from holding Direxion Daily Aerospace or generate 127.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.32%
Values	Daily Returns

DSJA  vs.  Direxion Daily Aerospace

DSJA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Direxion Daily Aerospace

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily Aerospace has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Direxion Daily is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with DSJA and Direxion Daily

The main advantage of trading using opposite DSJA and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DSJA 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 DSJA and Direxion Daily Aerospace 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.