Correlation Between Themes Lithium and Direxion Daily

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

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

Diversification Opportunities for Themes Lithium and Direxion Daily

0.06

Correlation Coefficient

Themes Lithium  Direxion Daily

Significant diversification

The 3 months correlation between Themes and Direxion is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Themes Lithium Battery and Direxion Daily Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Gold and Themes Lithium 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 Themes Lithium Battery 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 Gold has no effect on the direction of Themes Lithium i.e., Themes Lithium and Direxion Daily go up and down completely randomly.

Pair Corralation between Themes Lithium and Direxion Daily

Given the investment horizon of 90 days Themes Lithium Battery is expected to generate 0.69 times more return on investment than Direxion Daily. However, Themes Lithium Battery is 1.45 times less risky than Direxion Daily. It trades about 0.1 of its potential returns per unit of risk. Direxion Daily Gold is currently generating about -0.01 per unit of risk. If you would invest  2,684  in Themes Lithium Battery on September 5, 2024 and sell it today you would earn a total of  346.00  from holding Themes Lithium Battery or generate 12.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

Themes Lithium Battery  vs.  Direxion Daily Gold

Themes Lithium Battery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Lithium Battery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain primary indicators, Themes Lithium demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Direxion Daily is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Themes Lithium and Direxion Daily

The main advantage of trading using opposite Themes Lithium and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Themes Lithium 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 Themes Lithium Battery and Direxion Daily Gold 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.