Correlation Between IShares Basic and Direxion

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

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

Diversification Opportunities for IShares Basic and Direxion

0.0

Correlation Coefficient

IShares Basic  Direxion

Pay attention - limited upside

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

Pair Corralation between IShares Basic and Direxion

If you would invest (100.00) in Direxion on December 1, 2024 and sell it today you would earn a total of  100.00  from holding Direxion or generate -100.0% return on investment over 90 days.

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

iShares Basic Materials  vs.  Direxion

iShares Basic Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Basic Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Basic is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the investors.

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 very healthy technical and fundamental indicators, Direxion is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Basic and Direxion

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

The idea behind iShares Basic Materials and Direxion 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.