Correlation Between Direxion and Xtrackers FTSE

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

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

Diversification Opportunities for Direxion and Xtrackers FTSE

0.0

Correlation Coefficient

Direxion  Xtrackers FTSE

Pay attention - limited upside

The 3 months correlation between Direxion and Xtrackers is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Direxion and Xtrackers FTSE Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE Developed and Direxion 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 are associated (or correlated) with Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE Developed has no effect on the direction of Direxion i.e., Direxion and Xtrackers FTSE go up and down completely randomly.

Pair Corralation between Direxion and Xtrackers FTSE

If you would invest  2,821  in Xtrackers FTSE Developed on December 30, 2024 and sell it today you would earn a total of  209.00  from holding Xtrackers FTSE Developed or generate 7.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Direxion  vs.  Xtrackers FTSE Developed

Direxion

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Direxion is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Xtrackers FTSE Developed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers FTSE Developed are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Xtrackers FTSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Direxion and Xtrackers FTSE

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

The idea behind Direxion and Xtrackers FTSE Developed 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.