Correlation Between Direxion Daily and Fidelity MSCI

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

By analyzing existing cross correlation between Direxion Daily Industrials and Fidelity MSCI Industrials, you can compare the effects of market volatilities on Direxion Daily and Fidelity MSCI 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 Fidelity MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Fidelity MSCI.

Diversification Opportunities for Direxion Daily and Fidelity MSCI

0.99

Correlation Coefficient

Direxion Daily  Fidelity MSCI

No risk reduction

The 3 months correlation between Direxion and Fidelity is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Industrials and Fidelity MSCI Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity MSCI Industrials 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 Industrials are associated (or correlated) with Fidelity MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity MSCI Industrials has no effect on the direction of Direxion Daily i.e., Direxion Daily and Fidelity MSCI go up and down completely randomly.

Pair Corralation between Direxion Daily and Fidelity MSCI

Given the investment horizon of 90 days Direxion Daily Industrials is expected to under-perform the Fidelity MSCI. In addition to that, Direxion Daily is 2.86 times more volatile than Fidelity MSCI Industrials. It trades about -0.03 of its total potential returns per unit of risk. Fidelity MSCI Industrials is currently generating about -0.04 per unit of volatility. If you would invest  7,014  in Fidelity MSCI Industrials on December 29, 2024 and sell it today you would lose (194.00) from holding Fidelity MSCI Industrials or give up 2.77% of portfolio value over 90 days.

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

Direxion Daily Industrials  vs.  Fidelity MSCI Industrials

Direxion Daily Indus

Risk-Adjusted Performance

Very Weak

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

Fidelity MSCI Industrials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity MSCI Industrials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Fidelity MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Direxion Daily and Fidelity MSCI

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

The idea behind Direxion Daily Industrials and Fidelity MSCI Industrials 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.