Correlation Between Direxion Daily and DB Gold

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

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

Diversification Opportunities for Direxion Daily and DB Gold

0.13

Correlation Coefficient

Direxion Daily  DB Gold

Average diversification

The 3 months correlation between Direxion and DGZ is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and DB Gold Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Gold Short and Direxion Daily 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 Direxion Daily SP are associated (or correlated) with DB Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Gold Short has no effect on the direction of Direxion Daily i.e., Direxion Daily and DB Gold go up and down completely randomly.

Pair Corralation between Direxion Daily and DB Gold

Given the investment horizon of 90 days Direxion Daily SP is expected to generate 2.15 times more return on investment than DB Gold. However, Direxion Daily is 2.15 times more volatile than DB Gold Short. It trades about 0.09 of its potential returns per unit of risk. DB Gold Short is currently generating about -0.01 per unit of risk. If you would invest  575.00  in Direxion Daily SP on October 3, 2024 and sell it today you would earn a total of  150.00  from holding Direxion Daily SP or generate 26.09% return on investment over 90 days.

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

Direxion Daily SP  vs.  DB Gold Short

Direxion Daily SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Direxion Daily exhibited solid returns over the last few months and may actually be approaching a breakup point.

DB Gold Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Gold Short has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, DB Gold is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and DB Gold

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

The idea behind Direxion Daily SP and DB Gold Short 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.