Correlation Between Direxion Daily and KLNE

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

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

Diversification Opportunities for Direxion Daily and KLNE

0.0

Correlation Coefficient

Direxion Daily  KLNE

Pay attention - limited upside

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

Pair Corralation between Direxion Daily and KLNE

If you would invest  2,694  in Direxion Daily SP on December 29, 2024 and sell it today you would lose (45.00) from holding Direxion Daily SP or give up 1.67% of portfolio value over 90 days.

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

Direxion Daily SP  vs.  KLNE

Direxion Daily SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily SP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Direxion Daily is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

KLNE

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Direxion Daily and KLNE

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

The idea behind Direxion Daily SP and KLNE 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.