Correlation Between Coca Cola and Direxion Daily

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

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

Diversification Opportunities for Coca Cola and Direxion Daily

0.43

Correlation Coefficient

Coca Cola  Direxion Daily

Very weak diversification

The 3 months correlation between Coca and Direxion is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and Coca Cola 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 The Coca Cola 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 SP has no effect on the direction of Coca Cola i.e., Coca Cola and Direxion Daily go up and down completely randomly.

Pair Corralation between Coca Cola and Direxion Daily

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.43 times more return on investment than Direxion Daily. However, The Coca Cola is 2.34 times less risky than Direxion Daily. It trades about 0.19 of its potential returns per unit of risk. Direxion Daily SP is currently generating about 0.07 per unit of risk. If you would invest  6,158  in The Coca Cola on December 28, 2024 and sell it today you would earn a total of  916.00  from holding The Coca Cola or generate 14.87% return on investment over 90 days.

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

The Coca Cola  vs.  Direxion Daily SP

Coca Cola

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Coca Cola displayed solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily SP

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and Direxion Daily

The main advantage of trading using opposite Coca Cola and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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 The Coca Cola and Direxion Daily SP 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..