Correlation Between Direxion Daily and Virtus Kar

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

Diversification Opportunities for Direxion Daily and Virtus Kar

0.93

Correlation Coefficient

Direxion Daily  Virtus Kar

Almost no diversification

The 3 months correlation between Direxion and Virtus is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Virtus Kar Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Small 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 Virtus Kar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Kar Small has no effect on the direction of Direxion Daily i.e., Direxion Daily and Virtus Kar go up and down completely randomly.

Pair Corralation between Direxion Daily and Virtus Kar

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Virtus Kar. In addition to that, Direxion Daily is 2.85 times more volatile than Virtus Kar Small Cap. It trades about -0.11 of its total potential returns per unit of risk. Virtus Kar Small Cap is currently generating about -0.14 per unit of volatility. If you would invest  2,397  in Virtus Kar Small Cap on December 29, 2024 and sell it today you would lose (242.00) from holding Virtus Kar Small Cap or give up 10.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Direxion Daily Mid  vs.  Virtus Kar Small Cap

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.

Virtus Kar Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Kar Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Direxion Daily and Virtus Kar

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

The idea behind Direxion Daily Mid and Virtus Kar Small Cap 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..