Correlation Between MicroSectors Gold and Direxion Daily

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

By analyzing existing cross correlation between MicroSectors Gold 3X and Direxion Daily SP, you can compare the effects of market volatilities on MicroSectors Gold 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 MicroSectors Gold with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Gold and Direxion Daily.

Diversification Opportunities for MicroSectors Gold and Direxion Daily

-0.56

Correlation Coefficient

MicroSectors Gold  Direxion Daily

Excellent diversification

The 3 months correlation between MicroSectors and Direxion is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Gold 3X 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 MicroSectors Gold 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 MicroSectors Gold 3X 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 MicroSectors Gold i.e., MicroSectors Gold and Direxion Daily go up and down completely randomly.

Pair Corralation between MicroSectors Gold and Direxion Daily

Given the investment horizon of 90 days MicroSectors Gold 3X is expected to under-perform the Direxion Daily. In addition to that, MicroSectors Gold is 2.11 times more volatile than Direxion Daily SP. It trades about -0.08 of its total potential returns per unit of risk. Direxion Daily SP is currently generating about 0.2 per unit of volatility. If you would invest  13,243  in Direxion Daily SP on September 4, 2024 and sell it today you would earn a total of  2,457  from holding Direxion Daily SP or generate 18.55% return on investment over 90 days.

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

MicroSectors Gold 3X  vs.  Direxion Daily SP

MicroSectors Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MicroSectors Gold 3X has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Etf's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Direxion Daily SP

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroSectors Gold and Direxion Daily

The main advantage of trading using opposite MicroSectors Gold and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors Gold 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 MicroSectors Gold 3X 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.