Correlation Between Direxion Daily and Red Moon

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

Diversification Opportunities for Direxion Daily and Red Moon

0.59

Correlation Coefficient

Direxion Daily  Red Moon

Very weak diversification

The 3 months correlation between Direxion and Red is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Red Moon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Moon Resources 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 Red Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Moon Resources has no effect on the direction of Direxion Daily i.e., Direxion Daily and Red Moon go up and down completely randomly.

Pair Corralation between Direxion Daily and Red Moon

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 0.79 times more return on investment than Red Moon. However, Direxion Daily Mid is 1.26 times less risky than Red Moon. It trades about -0.11 of its potential returns per unit of risk. Red Moon Resources is currently generating about -0.19 per unit of risk. If you would invest  5,228  in Direxion Daily Mid on December 28, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Direxion Daily Mid  vs.  Red Moon Resources

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.

Red Moon Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Moon Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Direxion Daily and Red Moon

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

The idea behind Direxion Daily Mid and Red Moon Resources 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.