Correlation Between Freedom Day and Direxion Daily

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

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

Diversification Opportunities for Freedom Day and Direxion Daily

-0.45

Correlation Coefficient

Freedom Day  Direxion Daily

Very good diversification

The 3 months correlation between Freedom and Direxion is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend 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 Freedom Day 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 Freedom Day Dividend 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 Freedom Day i.e., Freedom Day and Direxion Daily go up and down completely randomly.

Pair Corralation between Freedom Day and Direxion Daily

Given the investment horizon of 90 days Freedom Day is expected to generate 13.72 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Freedom Day Dividend is 3.99 times less risky than Direxion Daily. It trades about 0.03 of its potential returns per unit of risk. Direxion Daily TSM is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,095  in Direxion Daily TSM on December 27, 2024 and sell it today you would earn a total of  308.00  from holding Direxion Daily TSM or generate 14.7% return on investment over 90 days.

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

Freedom Day Dividend  vs.  Direxion Daily TSM

Freedom Day Dividend

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Day Dividend are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Direxion Daily TSM

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily TSM are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Direxion Daily showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Freedom Day and Direxion Daily

The main advantage of trading using opposite Freedom Day and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Day 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 Freedom Day Dividend 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..