Correlation Between Innovator ETFs and Direxion Daily

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

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

Diversification Opportunities for Innovator ETFs and Direxion Daily

-0.26

Correlation Coefficient

Innovator ETFs  Direxion Daily

Very good diversification

The 3 months correlation between Innovator and Direxion is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Innovator ETFs Trust and Direxion Daily MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily MSCI and Innovator ETFs 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 Innovator ETFs 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 MSCI has no effect on the direction of Innovator ETFs i.e., Innovator ETFs and Direxion Daily go up and down completely randomly.

Pair Corralation between Innovator ETFs and Direxion Daily

Given the investment horizon of 90 days Innovator ETFs is expected to generate 14.57 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Innovator ETFs Trust is 13.02 times less risky than Direxion Daily. It trades about 0.21 of its potential returns per unit of risk. Direxion Daily MSCI is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  4,259  in Direxion Daily MSCI on October 25, 2024 and sell it today you would earn a total of  482.00  from holding Direxion Daily MSCI or generate 11.32% return on investment over 90 days.

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

Innovator ETFs Trust  vs.  Direxion Daily MSCI

Innovator ETFs Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator ETFs Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Innovator ETFs is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Direxion Daily MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with Innovator ETFs and Direxion Daily

The main advantage of trading using opposite Innovator ETFs and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator ETFs 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 Innovator ETFs Trust and Direxion Daily MSCI 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.