Correlation Between Direxion Daily and Ranplan

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

Diversification Opportunities for Direxion Daily and Ranplan

0.22

Correlation Coefficient

Direxion Daily  Ranplan

Modest diversification

The 3 months correlation between Direxion and Ranplan is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Ranplan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ranplan Group 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 Ranplan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ranplan Group has no effect on the direction of Direxion Daily i.e., Direxion Daily and Ranplan go up and down completely randomly.

Pair Corralation between Direxion Daily and Ranplan

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 4.41 times more return on investment than Ranplan. However, Direxion Daily is 4.41 times more volatile than Ranplan Group. It trades about 0.22 of its potential returns per unit of risk. Ranplan Group is currently generating about 0.0 per unit of risk. If you would invest  4,627  in Direxion Daily Mid on September 6, 2024 and sell it today you would earn a total of  2,035  from holding Direxion Daily Mid or generate 43.98% return on investment over 90 days.

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

Direxion Daily Mid  vs.  Ranplan Group

Direxion Daily Mid

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ranplan Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ranplan Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ranplan is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Direxion Daily and Ranplan

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

The idea behind Direxion Daily Mid and Ranplan Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.