Correlation Between Direxion Daily and IShares

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

Diversification Opportunities for Direxion Daily and IShares

0.0

Correlation Coefficient

Direxion Daily  IShares

Pay attention - limited upside

The 3 months correlation between Direxion and IShares is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily MSCI and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares 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 IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of Direxion Daily i.e., Direxion Daily and IShares go up and down completely randomly.

Pair Corralation between Direxion Daily and IShares

If you would invest  1,005  in Direxion Daily MSCI on December 21, 2024 and sell it today you would earn a total of  192.00  from holding Direxion Daily MSCI or generate 19.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Direxion Daily MSCI  vs.  IShares

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 7 (%) 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.

IShares

Risk-Adjusted Performance

Very Weak

Over the last 90 days IShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, IShares is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and IShares

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

The idea behind Direxion Daily MSCI and IShares 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.