Correlation Between Direxion Daily and Rai Way

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

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

Diversification Opportunities for Direxion Daily and Rai Way

-0.32

Correlation Coefficient

Direxion Daily  Rai Way

Very good diversification

The 3 months correlation between Direxion and Rai is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Rai Way SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rai Way SpA 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 Mid are associated (or correlated) with Rai Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rai Way SpA has no effect on the direction of Direxion Daily i.e., Direxion Daily and Rai Way go up and down completely randomly.

Pair Corralation between Direxion Daily and Rai Way

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Rai Way. In addition to that, Direxion Daily is 2.56 times more volatile than Rai Way SpA. It trades about -0.07 of its total potential returns per unit of risk. Rai Way SpA is currently generating about -0.03 per unit of volatility. If you would invest  506.00  in Rai Way SpA on September 12, 2024 and sell it today you would lose (4.00) from holding Rai Way SpA or give up 0.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Direxion Daily Mid  vs.  Rai Way SpA

Direxion Daily Mid

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rai Way SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rai Way SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Rai Way is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Direxion Daily and Rai Way

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

The idea behind Direxion Daily Mid and Rai Way SpA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.