Correlation Between Direxion Daily and Active International

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

Diversification Opportunities for Direxion Daily and Active International

-0.66

Correlation Coefficient

Direxion Daily  Active International

Excellent diversification

The 3 months correlation between Direxion and Active is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Active International Allocatio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active International 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 Active International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active International has no effect on the direction of Direxion Daily i.e., Direxion Daily and Active International go up and down completely randomly.

Pair Corralation between Direxion Daily and Active International

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Active International. In addition to that, Direxion Daily is 3.89 times more volatile than Active International Allocation. It trades about -0.11 of its total potential returns per unit of risk. Active International Allocation is currently generating about 0.2 per unit of volatility. If you would invest  1,555  in Active International Allocation on December 29, 2024 and sell it today you would earn a total of  169.00  from holding Active International Allocation or generate 10.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Direxion Daily Mid  vs.  Active International Allocatio

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.

Active International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Active International Allocation are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Active International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Direxion Daily and Active International

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

The idea behind Direxion Daily Mid and Active International Allocation 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.