Correlation Between Direxion Daily and GDS Holdings

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

Diversification Opportunities for Direxion Daily and GDS Holdings

-0.55

Correlation Coefficient

Direxion Daily  GDS Holdings

Excellent diversification

The 3 months correlation between Direxion and GDS is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and GDS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GDS Holdings 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 GDS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GDS Holdings has no effect on the direction of Direxion Daily i.e., Direxion Daily and GDS Holdings go up and down completely randomly.

Pair Corralation between Direxion Daily and GDS Holdings

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the GDS Holdings. But the etf apears to be less risky and, when comparing its historical volatility, Direxion Daily Mid is 2.25 times less risky than GDS Holdings. The etf trades about -0.15 of its potential returns per unit of risk. The GDS Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,980  in GDS Holdings on December 2, 2024 and sell it today you would earn a total of  1,825  from holding GDS Holdings or generate 92.17% return on investment over 90 days.

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

Direxion Daily Mid  vs.  GDS Holdings

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.

GDS Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GDS Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, GDS Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and GDS Holdings

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

The idea behind Direxion Daily Mid and GDS Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.