Correlation Between Direxion and Vanguard FTSE

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

By analyzing existing cross correlation between Direxion and Vanguard FTSE All World, you can compare the effects of market volatilities on Direxion and Vanguard 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 Vanguard FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion and Vanguard FTSE.

Diversification Opportunities for Direxion and Vanguard FTSE

-0.62

Correlation Coefficient

Direxion  Vanguard FTSE

Excellent diversification

The 3 months correlation between Direxion and Vanguard is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Direxion and Vanguard FTSE All World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard FTSE All 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 Vanguard FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard FTSE All has no effect on the direction of Direxion i.e., Direxion and Vanguard FTSE go up and down completely randomly.

Pair Corralation between Direxion and Vanguard FTSE

If you would invest  1,275  in Direxion on August 30, 2024 and sell it today you would earn a total of  0.00  from holding Direxion or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Direxion  vs.  Vanguard FTSE All World

Direxion

Risk-Adjusted Performance

0 of 100

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.

Vanguard FTSE All

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE All World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Direxion and Vanguard FTSE

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

The idea behind Direxion and Vanguard FTSE All World 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..