Correlation Between Direxion Daily and AUPU Home

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

Diversification Opportunities for Direxion Daily and AUPU Home

0.74

Correlation Coefficient

Direxion Daily  AUPU Home

Poor diversification

The 3 months correlation between Direxion and AUPU is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and AUPU Home Style in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUPU Home Style 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 AUPU Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUPU Home Style has no effect on the direction of Direxion Daily i.e., Direxion Daily and AUPU Home go up and down completely randomly.

Pair Corralation between Direxion Daily and AUPU Home

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 1.35 times more return on investment than AUPU Home. However, Direxion Daily is 1.35 times more volatile than AUPU Home Style. It trades about 0.06 of its potential returns per unit of risk. AUPU Home Style is currently generating about 0.03 per unit of risk. If you would invest  3,515  in Direxion Daily Mid on September 5, 2024 and sell it today you would earn a total of  3,105  from holding Direxion Daily Mid or generate 88.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.16%
Values	Daily Returns

Direxion Daily Mid  vs.  AUPU Home Style

Direxion Daily Mid

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 14 (%) 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.

AUPU Home Style

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AUPU Home Style are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AUPU Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and AUPU Home

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

The idea behind Direxion Daily Mid and AUPU Home Style 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.