Correlation Between IShares Global and Direxion Daily

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

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

Diversification Opportunities for IShares Global and Direxion Daily

0.32

Correlation Coefficient

IShares Global  Direxion Daily

Weak diversification

The 3 months correlation between IShares and Direxion is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Industrials and Direxion Daily Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Indus and IShares Global 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 iShares Global Industrials 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 Indus has no effect on the direction of IShares Global i.e., IShares Global and Direxion Daily go up and down completely randomly.

Pair Corralation between IShares Global and Direxion Daily

Considering the 90-day investment horizon iShares Global Industrials is expected to generate 0.33 times more return on investment than Direxion Daily. However, iShares Global Industrials is 3.06 times less risky than Direxion Daily. It trades about 0.07 of its potential returns per unit of risk. Direxion Daily Industrials is currently generating about -0.01 per unit of risk. If you would invest  14,350  in iShares Global Industrials on December 26, 2024 and sell it today you would earn a total of  537.00  from holding iShares Global Industrials or generate 3.74% return on investment over 90 days.

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

iShares Global Industrials  vs.  Direxion Daily Industrials

iShares Global Indus

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Industrials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with IShares Global and Direxion Daily

The main advantage of trading using opposite IShares Global and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global 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 iShares Global Industrials and Direxion Daily 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.