Correlation Between Direxion Daily and ADT
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and ADT 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 ADT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily FTSE and ADT Inc, you can compare the effects of market volatilities on Direxion Daily and ADT 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 ADT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and ADT.
Diversification Opportunities for Direxion Daily and ADT
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direxion and ADT is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily FTSE and ADT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADT Inc 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 FTSE are associated (or correlated) with ADT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADT Inc has no effect on the direction of Direxion Daily i.e., Direxion Daily and ADT go up and down completely randomly.
Pair Corralation between Direxion Daily and ADT
Given the investment horizon of 90 days Direxion Daily FTSE is expected to generate 1.43 times more return on investment than ADT. However, Direxion Daily is 1.43 times more volatile than ADT Inc. It trades about 0.18 of its potential returns per unit of risk. ADT Inc is currently generating about 0.16 per unit of risk. If you would invest 2,037 in Direxion Daily FTSE on December 28, 2024 and sell it today you would earn a total of 704.00 from holding Direxion Daily FTSE or generate 34.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 98.36% |
Values | Daily Returns |
Direxion Daily FTSE vs. ADT Inc
Performance |
Timeline |
Direxion Daily FTSE |
ADT Inc |
Direxion Daily and ADT Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Direxion Daily and ADT
The main advantage of trading using opposite Direxion Daily and ADT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, ADT 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 ADT will offset losses from the drop in ADT's long position.Direxion Daily vs. Direxion Daily South | Direxion Daily vs. Direxion Daily Mid | Direxion Daily vs. Direxion Daily MSCI | Direxion Daily vs. Direxion Daily MSCI |
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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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