Correlation Between Direxion Daily and LightPath Technologies

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

Diversification Opportunities for Direxion Daily and LightPath Technologies

0.76

Correlation Coefficient

Direxion Daily  LightPath Technologies

Poor diversification

The 3 months correlation between Direxion and LightPath is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and LightPath Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LightPath Technologies 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 LightPath Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LightPath Technologies has no effect on the direction of Direxion Daily i.e., Direxion Daily and LightPath Technologies go up and down completely randomly.

Pair Corralation between Direxion Daily and LightPath Technologies

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 0.62 times more return on investment than LightPath Technologies. However, Direxion Daily Mid is 1.61 times less risky than LightPath Technologies. It trades about -0.1 of its potential returns per unit of risk. LightPath Technologies is currently generating about -0.16 per unit of risk. If you would invest  5,228  in Direxion Daily Mid on December 30, 2024 and sell it today you would lose (1,124) from holding Direxion Daily Mid or give up 21.5% of portfolio value over 90 days.

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

Direxion Daily Mid  vs.  LightPath Technologies

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.

LightPath Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days LightPath Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Direxion Daily and LightPath Technologies

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

The idea behind Direxion Daily Mid and LightPath Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.