Correlation Between Direxion Daily and Centr Brands Corp

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

Diversification Opportunities for Direxion Daily and Centr Brands Corp

-0.01

Correlation Coefficient

Direxion Daily  Centr Brands Corp

Good diversification

The 3 months correlation between Direxion and Centr is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Centr Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centr Brands Corp 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 Centr Brands Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centr Brands Corp has no effect on the direction of Direxion Daily i.e., Direxion Daily and Centr Brands Corp go up and down completely randomly.

Pair Corralation between Direxion Daily and Centr Brands Corp

Given the investment horizon of 90 days Direxion Daily is expected to generate 18.7 times less return on investment than Centr Brands Corp. But when comparing it to its historical volatility, Direxion Daily Mid is 23.74 times less risky than Centr Brands Corp. It trades about 0.19 of its potential returns per unit of risk. Centr Brands Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3.60  in Centr Brands Corp on September 5, 2024 and sell it today you would earn a total of  8.40  from holding Centr Brands Corp or generate 233.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Direxion Daily Mid  vs.  Centr Brands Corp

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.

Centr Brands Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Centr Brands Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Centr Brands Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and Centr Brands Corp

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

The idea behind Direxion Daily Mid and Centr Brands Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.