Correlation Between Direxion Shares and Direxion Shares

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

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

Diversification Opportunities for Direxion Shares and Direxion Shares

0.74

Correlation Coefficient

Direxion Shares  Direxion Shares

Poor diversification

The 3 months correlation between Direxion and Direxion is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Shares ETF and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF and Direxion Shares 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 Shares ETF are associated (or correlated) with Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of Direxion Shares i.e., Direxion Shares and Direxion Shares go up and down completely randomly.

Pair Corralation between Direxion Shares and Direxion Shares

Assuming the 90 days trading horizon Direxion Shares ETF is expected to under-perform the Direxion Shares. But the etf apears to be less risky and, when comparing its historical volatility, Direxion Shares ETF is 1.4 times less risky than Direxion Shares. The etf trades about -0.12 of its potential returns per unit of risk. The Direxion Shares ETF is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  14,803  in Direxion Shares ETF on October 9, 2024 and sell it today you would lose (1,913) from holding Direxion Shares ETF or give up 12.92% of portfolio value over 90 days.

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

Direxion Shares ETF  vs.  Direxion Shares ETF

Direxion Shares ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Shares ETF 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 fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Direxion Shares ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Shares ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Direxion Shares and Direxion Shares

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

The idea behind Direxion Shares ETF and Direxion Shares ETF 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.