Correlation Between Global X and Direxion Daily

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

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

Diversification Opportunities for Global X and Direxion Daily

0.15

Correlation Coefficient

Global X  Direxion Daily

Average diversification

The 3 months correlation between Global and Direxion is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Global X Lithium and Direxion Daily Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Semic and Global X 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 Global X Lithium 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 Semic has no effect on the direction of Global X i.e., Global X and Direxion Daily go up and down completely randomly.

Pair Corralation between Global X and Direxion Daily

Considering the 90-day investment horizon Global X Lithium is expected to generate 0.46 times more return on investment than Direxion Daily. However, Global X Lithium is 2.16 times less risky than Direxion Daily. It trades about 0.13 of its potential returns per unit of risk. Direxion Daily Semiconductor is currently generating about 0.03 per unit of risk. If you would invest  3,674  in Global X Lithium on September 5, 2024 and sell it today you would earn a total of  763.00  from holding Global X Lithium or generate 20.77% return on investment over 90 days.

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

Global X Lithium  vs.  Direxion Daily Semiconductor

Global X Lithium

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Lithium are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, Global X unveiled solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily Semic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Semiconductor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global X and Direxion Daily

The main advantage of trading using opposite Global X and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X Lithium and Direxion Daily Semiconductor 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.