Correlation Between Direxion Daily and Advisors Inner

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Advisors Inner 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 Advisors Inner 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 The Advisors Inner, you can compare the effects of market volatilities on Direxion Daily and Advisors Inner 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 Advisors Inner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Advisors Inner.

Diversification Opportunities for Direxion Daily and Advisors Inner

0.71

Correlation Coefficient

Direxion Daily  Advisors Inner

Poor diversification

The 3 months correlation between Direxion and Advisors is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily MSCI and The Advisors Inner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Inner 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 Advisors Inner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Inner has no effect on the direction of Direxion Daily i.e., Direxion Daily and Advisors Inner go up and down completely randomly.

Pair Corralation between Direxion Daily and Advisors Inner

Given the investment horizon of 90 days Direxion Daily MSCI is expected to generate 7.36 times more return on investment than Advisors Inner. However, Direxion Daily is 7.36 times more volatile than The Advisors Inner. It trades about 0.13 of its potential returns per unit of risk. The Advisors Inner is currently generating about 0.26 per unit of risk. If you would invest  899.00  in Direxion Daily MSCI on December 30, 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	100.0%
Values	Daily Returns

Direxion Daily MSCI  vs.  The Advisors Inner

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.

Advisors Inner

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Advisors Inner are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Advisors Inner may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Direxion Daily and Advisors Inner

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

The idea behind Direxion Daily MSCI and The Advisors Inner 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.