Correlation Between Direxion Daily and Airports

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

Diversification Opportunities for Direxion Daily and Airports

-0.26

Correlation Coefficient

Direxion Daily  Airports

Very good diversification

The 3 months correlation between Direxion and Airports is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand 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 Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of Direxion Daily i.e., Direxion Daily and Airports go up and down completely randomly.

Pair Corralation between Direxion Daily and Airports

Given the investment horizon of 90 days Direxion Daily is expected to generate 30.8 times less return on investment than Airports. But when comparing it to its historical volatility, Direxion Daily Mid is 46.09 times less risky than Airports. It trades about 0.17 of its potential returns per unit of risk. Airports of Thailand is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,070  in Airports of Thailand on September 12, 2024 and sell it today you would lose (1,020) from holding Airports of Thailand or give up 14.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Direxion Daily Mid  vs.  Airports of Thailand

Direxion Daily Mid

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 13 (%) 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.

Airports of Thailand

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Airports of Thailand are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Airports sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and Airports

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

The idea behind Direxion Daily Mid and Airports of Thailand 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.