Correlation Between IShares Global and Direxion Shares

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

By analyzing existing cross correlation between iShares Global Clean and Direxion Shares ETF, you can compare the effects of market volatilities on IShares Global and Direxion Shares 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 Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and Direxion Shares.

Diversification Opportunities for IShares Global and Direxion Shares

0.39

Correlation Coefficient

IShares Global  Direxion Shares

Weak diversification

The 3 months correlation between IShares and Direxion is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Clean and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF 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 Clean are associated (or correlated) with Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of IShares Global i.e., IShares Global and Direxion Shares go up and down completely randomly.

Pair Corralation between IShares Global and Direxion Shares

Assuming the 90 days trading horizon iShares Global Clean is expected to generate 0.35 times more return on investment than Direxion Shares. However, iShares Global Clean is 2.88 times less risky than Direxion Shares. It trades about 0.02 of its potential returns per unit of risk. Direxion Shares ETF is currently generating about 0.0 per unit of risk. If you would invest  23,550  in iShares Global Clean on December 24, 2024 and sell it today you would earn a total of  164.00  from holding iShares Global Clean or generate 0.7% 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 Clean  vs.  Direxion Shares ETF

iShares Global Clean

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Clean are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Direxion Shares ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Shares ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Direxion Shares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Global and Direxion Shares

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

The idea behind iShares Global Clean and Direxion Shares ETF 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 Transaction History module to view history of all your transactions and understand their impact on performance.