Correlation Between IShares Technology and Direxion Work

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

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

Diversification Opportunities for IShares Technology and Direxion Work

0.81

Correlation Coefficient

IShares Technology  Direxion Work

Very poor diversification

The 3 months correlation between IShares and Direxion is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Technology ETF and Direxion Work From in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Work From and IShares Technology 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 Technology ETF are associated (or correlated) with Direxion Work. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Work From has no effect on the direction of IShares Technology i.e., IShares Technology and Direxion Work go up and down completely randomly.

Pair Corralation between IShares Technology and Direxion Work

Considering the 90-day investment horizon iShares Technology ETF is expected to under-perform the Direxion Work. In addition to that, IShares Technology is 1.09 times more volatile than Direxion Work From. It trades about -0.09 of its total potential returns per unit of risk. Direxion Work From is currently generating about -0.06 per unit of volatility. If you would invest  6,567  in Direxion Work From on December 20, 2024 and sell it today you would lose (414.00) from holding Direxion Work From or give up 6.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

iShares Technology ETF  vs.  Direxion Work From

iShares Technology ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Technology ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Direxion Work From

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IShares Technology and Direxion Work

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

The idea behind iShares Technology ETF and Direxion Work From 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.