Correlation Between Direxion Daily and Rockfire Resources

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

Diversification Opportunities for Direxion Daily and Rockfire Resources

-0.08

Correlation Coefficient

Direxion Daily  Rockfire Resources

Good diversification

The 3 months correlation between Direxion and Rockfire is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Rockfire Resources plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockfire Resources plc 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 Rockfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockfire Resources plc has no effect on the direction of Direxion Daily i.e., Direxion Daily and Rockfire Resources go up and down completely randomly.

Pair Corralation between Direxion Daily and Rockfire Resources

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 0.45 times more return on investment than Rockfire Resources. However, Direxion Daily Mid is 2.22 times less risky than Rockfire Resources. It trades about -0.03 of its potential returns per unit of risk. Rockfire Resources plc is currently generating about -0.17 per unit of risk. If you would invest  5,254  in Direxion Daily Mid on December 2, 2024 and sell it today you would lose (231.00) from holding Direxion Daily Mid or give up 4.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.02%
Values	Daily Returns

Direxion Daily Mid  vs.  Rockfire Resources plc

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.

Rockfire Resources plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rockfire Resources plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Rockfire Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and Rockfire Resources

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

The idea behind Direxion Daily Mid and Rockfire Resources plc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.