Correlation Between Direxion Daily and Tidal Trust

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

By analyzing existing cross correlation between Direxion Daily META and Tidal Trust II, you can compare the effects of market volatilities on Direxion Daily and Tidal Trust 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 Tidal Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Tidal Trust.

Diversification Opportunities for Direxion Daily and Tidal Trust

0.06

Correlation Coefficient

Direxion Daily  Tidal Trust

Significant diversification

The 3 months correlation between Direxion and Tidal is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily META and Tidal Trust II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidal Trust II 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 META are associated (or correlated) with Tidal Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidal Trust II has no effect on the direction of Direxion Daily i.e., Direxion Daily and Tidal Trust go up and down completely randomly.

Pair Corralation between Direxion Daily and Tidal Trust

Given the investment horizon of 90 days Direxion Daily META is expected to generate 0.87 times more return on investment than Tidal Trust. However, Direxion Daily META is 1.15 times less risky than Tidal Trust. It trades about 0.07 of its potential returns per unit of risk. Tidal Trust II is currently generating about -0.07 per unit of risk. If you would invest  2,651  in Direxion Daily META on October 23, 2024 and sell it today you would earn a total of  952.00  from holding Direxion Daily META or generate 35.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	17.2%
Values	Daily Returns

Direxion Daily META  vs.  Tidal Trust II

Direxion Daily META

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily META are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tidal Trust II

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tidal Trust II has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Direxion Daily and Tidal Trust

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

The idea behind Direxion Daily META and Tidal Trust II 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.