Correlation Between Direxion Daily and IShares Dividend

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and IShares Dividend 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 IShares Dividend 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 iShares Dividend and, you can compare the effects of market volatilities on Direxion Daily and IShares Dividend 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 IShares Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and IShares Dividend.

Diversification Opportunities for Direxion Daily and IShares Dividend

0.79

Correlation Coefficient

Direxion Daily  IShares Dividend

Poor diversification

The 3 months correlation between Direxion and IShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily FTSE and iShares Dividend and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Dividend 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 IShares Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Dividend has no effect on the direction of Direxion Daily i.e., Direxion Daily and IShares Dividend go up and down completely randomly.

Pair Corralation between Direxion Daily and IShares Dividend

Given the investment horizon of 90 days Direxion Daily FTSE is expected to generate 3.43 times more return on investment than IShares Dividend. However, Direxion Daily is 3.43 times more volatile than iShares Dividend and. It trades about 0.19 of its potential returns per unit of risk. iShares Dividend and is currently generating about -0.01 per unit of risk. If you would invest  2,165  in Direxion Daily FTSE on November 27, 2024 and sell it today you would earn a total of  602.00  from holding Direxion Daily FTSE or generate 27.81% return on investment over 90 days.

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

Direxion Daily FTSE  vs.  iShares Dividend and

Direxion Daily FTSE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily FTSE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Direxion Daily disclosed solid returns over the last few months and may actually be approaching a breakup point.

iShares Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Dividend and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, IShares Dividend is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and IShares Dividend

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

The idea behind Direxion Daily FTSE and iShares Dividend and 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.