Correlation Between Direxion Daily and Capital Group

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

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

Diversification Opportunities for Direxion Daily and Capital Group

0.79

Correlation Coefficient

Direxion Daily  Capital Group

Poor diversification

The 3 months correlation between Direxion and Capital is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily MSCI and Capital Group New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group New 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 MSCI are associated (or correlated) with Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group New has no effect on the direction of Direxion Daily i.e., Direxion Daily and Capital Group go up and down completely randomly.

Pair Corralation between Direxion Daily and Capital Group

Given the investment horizon of 90 days Direxion Daily MSCI is expected to generate 4.05 times more return on investment than Capital Group. However, Direxion Daily is 4.05 times more volatile than Capital Group New. It trades about 0.13 of its potential returns per unit of risk. Capital Group New is currently generating about 0.03 per unit of risk. If you would invest  899.00  in Direxion Daily MSCI on December 29, 2024 and sell it today you would earn a total of  284.00  from holding Direxion Daily MSCI or generate 31.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Direxion Daily MSCI  vs.  Capital Group New

Direxion Daily MSCI

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily MSCI are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Direxion Daily showed solid returns over the last few months and may actually be approaching a breakup point.

Capital Group New

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group New are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Capital Group is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Direxion Daily and Capital Group

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

The idea behind Direxion Daily MSCI and Capital Group New 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.