Correlation Between Direxion Daily and Vanguard Total

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

Diversification Opportunities for Direxion Daily and Vanguard Total

-0.08

Correlation Coefficient

Direxion Daily  Vanguard Total

Good diversification

The 3 months correlation between Direxion and Vanguard is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily MSCI and Vanguard Total World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total World 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total World has no effect on the direction of Direxion Daily i.e., Direxion Daily and Vanguard Total go up and down completely randomly.

Pair Corralation between Direxion Daily and Vanguard Total

Given the investment horizon of 90 days Direxion Daily MSCI is expected to under-perform the Vanguard Total. In addition to that, Direxion Daily is 5.32 times more volatile than Vanguard Total World. It trades about -0.16 of its total potential returns per unit of risk. Vanguard Total World is currently generating about 0.01 per unit of volatility. If you would invest  11,811  in Vanguard Total World on October 8, 2024 and sell it today you would earn a total of  34.00  from holding Vanguard Total World or generate 0.29% return on investment over 90 days.

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

Direxion Daily MSCI  vs.  Vanguard Total World

Direxion Daily MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Vanguard Total World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Total World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vanguard Total is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Direxion Daily and Vanguard Total

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

The idea behind Direxion Daily MSCI and Vanguard Total World 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.