Correlation Between Lumia and Direxion Daily

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

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

Diversification Opportunities for Lumia and Direxion Daily

-0.45

Correlation Coefficient

Lumia  Direxion Daily

Very good diversification

The 3 months correlation between Lumia and Direxion is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and Direxion Daily TSM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily TSM and Lumia 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 Lumia 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 TSM has no effect on the direction of Lumia i.e., Lumia and Direxion Daily go up and down completely randomly.

Pair Corralation between Lumia and Direxion Daily

Assuming the 90 days trading horizon Lumia is expected to generate 36.02 times more return on investment than Direxion Daily. However, Lumia is 36.02 times more volatile than Direxion Daily TSM. It trades about 0.08 of its potential returns per unit of risk. Direxion Daily TSM is currently generating about -0.11 per unit of risk. If you would invest  0.00  in Lumia on October 10, 2024 and sell it today you would earn a total of  128.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	51.97%
Values	Daily Returns

Lumia  vs.  Direxion Daily TSM

Lumia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Lumia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily TSM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily TSM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Lumia and Direxion Daily

The main advantage of trading using opposite Lumia and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia 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 Lumia and Direxion Daily TSM 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.