Correlation Between Direxion Daily and Arlington Asset
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Arlington Asset 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 Arlington Asset 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 Arlington Asset Investment, you can compare the effects of market volatilities on Direxion Daily and Arlington Asset 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 Arlington Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Arlington Asset.
Diversification Opportunities for Direxion Daily and Arlington Asset
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and Arlington is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Arlington Asset Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arlington Asset Inve 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 Arlington Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arlington Asset Inve has no effect on the direction of Direxion Daily i.e., Direxion Daily and Arlington Asset go up and down completely randomly.
Pair Corralation between Direxion Daily and Arlington Asset
Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 3.8 times more return on investment than Arlington Asset. However, Direxion Daily is 3.8 times more volatile than Arlington Asset Investment. It trades about 0.05 of its potential returns per unit of risk. Arlington Asset Investment is currently generating about -0.26 per unit of risk. If you would invest 4,398 in Direxion Daily Mid on September 10, 2024 and sell it today you would earn a total of 2,100 from holding Direxion Daily Mid or generate 47.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 1.7% |
Values | Daily Returns |
Direxion Daily Mid vs. Arlington Asset Investment
Performance |
Timeline |
Direxion Daily Mid |
Arlington Asset Inve |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Direxion Daily and Arlington Asset Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Direxion Daily and Arlington Asset
The main advantage of trading using opposite Direxion Daily and Arlington Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Arlington Asset 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 Arlington Asset will offset losses from the drop in Arlington Asset's long position.Direxion Daily vs. Direxion Daily Retail | Direxion Daily vs. Direxion Daily Industrials | Direxion Daily vs. Direxion Daily Transportation | Direxion Daily vs. Direxion Daily FTSE |
Arlington Asset vs. ACRES Commercial Realty | Arlington Asset vs. ACRES Commercial Realty | Arlington Asset vs. Cherry Hill Mortgage | Arlington Asset vs. Nexpoint Real Estate |
Check out your portfolio center.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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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