Correlation Between Knife River and Direxion Daily

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

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

Diversification Opportunities for Knife River and Direxion Daily

-0.66

Correlation Coefficient

Knife River  Direxion Daily

Excellent diversification

The 3 months correlation between Knife and Direxion is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Direxion Daily FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily FTSE and Knife River 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 Knife River 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 FTSE has no effect on the direction of Knife River i.e., Knife River and Direxion Daily go up and down completely randomly.

Pair Corralation between Knife River and Direxion Daily

Considering the 90-day investment horizon Knife River is expected to under-perform the Direxion Daily. But the stock apears to be less risky and, when comparing its historical volatility, Knife River is 1.02 times less risky than Direxion Daily. The stock trades about -0.04 of its potential returns per unit of risk. The Direxion Daily FTSE is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,037  in Direxion Daily FTSE on December 29, 2024 and sell it today you would earn a total of  726.00  from holding Direxion Daily FTSE or generate 35.64% return on investment over 90 days.

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

Knife River  vs.  Direxion Daily FTSE

Knife River

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knife River has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Direxion Daily FTSE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily FTSE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Direxion Daily disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knife River and Direxion Daily

The main advantage of trading using opposite Knife River and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River 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 Knife River and Direxion Daily FTSE 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.