Correlation Between Direxion Daily and Avoca LLC

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

Diversification Opportunities for Direxion Daily and Avoca LLC

0.34

Correlation Coefficient

Direxion Daily  Avoca LLC

Weak diversification

The 3 months correlation between Direxion and Avoca is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Avoca LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avoca LLC 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 Avoca LLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avoca LLC has no effect on the direction of Direxion Daily i.e., Direxion Daily and Avoca LLC go up and down completely randomly.

Pair Corralation between Direxion Daily and Avoca LLC

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Avoca LLC. But the etf apears to be less risky and, when comparing its historical volatility, Direxion Daily Mid is 2.91 times less risky than Avoca LLC. The etf trades about -0.34 of its potential returns per unit of risk. The Avoca LLC is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  156,000  in Avoca LLC on December 10, 2024 and sell it today you would lose (36,000) from holding Avoca LLC or give up 23.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Direxion Daily Mid  vs.  Avoca LLC

Direxion Daily Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily Mid 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 fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Avoca LLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avoca LLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Avoca LLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Direxion Daily and Avoca LLC

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

The idea behind Direxion Daily Mid and Avoca LLC 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 Stocks Directory module to find actively traded stocks across global markets.