Correlation Between GE Aerospace and Direxion Daily

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

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

Diversification Opportunities for GE Aerospace and Direxion Daily

-0.51

Correlation Coefficient

GE Aerospace  Direxion Daily

Excellent diversification

The 3 months correlation between GE Aerospace and Direxion is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding GE Aerospace and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and GE Aerospace 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 GE Aerospace 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 SP has no effect on the direction of GE Aerospace i.e., GE Aerospace and Direxion Daily go up and down completely randomly.

Pair Corralation between GE Aerospace and Direxion Daily

Allowing for the 90-day total investment horizon GE Aerospace is expected to generate 0.75 times more return on investment than Direxion Daily. However, GE Aerospace is 1.33 times less risky than Direxion Daily. It trades about 0.09 of its potential returns per unit of risk. Direxion Daily SP is currently generating about 0.05 per unit of risk. If you would invest  18,186  in GE Aerospace on November 28, 2024 and sell it today you would earn a total of  1,741  from holding GE Aerospace or generate 9.57% return on investment over 90 days.

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

GE Aerospace  vs.  Direxion Daily SP

GE Aerospace

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GE Aerospace are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, GE Aerospace may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Direxion Daily SP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with GE Aerospace and Direxion Daily

The main advantage of trading using opposite GE Aerospace and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GE Aerospace 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 GE Aerospace and Direxion Daily SP 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.