Correlation Between Direxion Daily and Lynas Rare

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

Diversification Opportunities for Direxion Daily and Lynas Rare

-0.67

Correlation Coefficient

Direxion Daily  Lynas Rare

Excellent diversification

The 3 months correlation between Direxion and Lynas is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Lynas Rare Earths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lynas Rare Earths 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 Lynas Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lynas Rare Earths has no effect on the direction of Direxion Daily i.e., Direxion Daily and Lynas Rare go up and down completely randomly.

Pair Corralation between Direxion Daily and Lynas Rare

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Lynas Rare. In addition to that, Direxion Daily is 1.3 times more volatile than Lynas Rare Earths. It trades about -0.11 of its total potential returns per unit of risk. Lynas Rare Earths is currently generating about 0.1 per unit of volatility. If you would invest  397.00  in Lynas Rare Earths on December 29, 2024 and sell it today you would earn a total of  54.00  from holding Lynas Rare Earths or generate 13.6% return on investment over 90 days.

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

Direxion Daily Mid  vs.  Lynas Rare Earths

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.

Lynas Rare Earths

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lynas Rare Earths are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Lynas Rare reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and Lynas Rare

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

The idea behind Direxion Daily Mid and Lynas Rare Earths 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.