Correlation Between Direxion Daily and BCN

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

Diversification Opportunities for Direxion Daily and BCN

-0.23

Correlation Coefficient

Direxion Daily  BCN

Very good diversification

The 3 months correlation between Direxion and BCN is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and BCN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCN 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 BCN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCN has no effect on the direction of Direxion Daily i.e., Direxion Daily and BCN go up and down completely randomly.

Pair Corralation between Direxion Daily and BCN

Given the investment horizon of 90 days Direxion Daily is expected to generate 209.74 times less return on investment than BCN. But when comparing it to its historical volatility, Direxion Daily Mid is 113.29 times less risky than BCN. It trades about 0.17 of its potential returns per unit of risk. BCN is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  0.00  in BCN on September 12, 2024 and sell it today you would earn a total of  0.00  from holding BCN or generate 115.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Direxion Daily Mid  vs.  BCN

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.

BCN

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BCN are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BCN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and BCN

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

The idea behind Direxion Daily Mid and BCN 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.