Correlation Between Direxion Daily and Fidelity Income

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

Diversification Opportunities for Direxion Daily and Fidelity Income

-0.17

Correlation Coefficient

Direxion Daily  Fidelity Income

Good diversification

The 3 months correlation between Direxion and Fidelity is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Fidelity Income Replacement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Income Repl 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 Fidelity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Income Repl has no effect on the direction of Direxion Daily i.e., Direxion Daily and Fidelity Income go up and down completely randomly.

Pair Corralation between Direxion Daily and Fidelity Income

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 12.04 times more return on investment than Fidelity Income. However, Direxion Daily is 12.04 times more volatile than Fidelity Income Replacement. It trades about 0.28 of its potential returns per unit of risk. Fidelity Income Replacement is currently generating about 0.21 per unit of risk. If you would invest  5,385  in Direxion Daily Mid on September 5, 2024 and sell it today you would earn a total of  1,235  from holding Direxion Daily Mid or generate 22.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Direxion Daily Mid  vs.  Fidelity Income Replacement

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.

Fidelity Income Repl

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Income Replacement are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Fidelity Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and Fidelity Income

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

The idea behind Direxion Daily Mid and Fidelity Income Replacement 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 Transaction History module to view history of all your transactions and understand their impact on performance.