Correlation Between Direxion Daily and Schouw

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

Diversification Opportunities for Direxion Daily and Schouw

-0.84

Correlation Coefficient

Direxion Daily  Schouw

Pay attention - limited upside

The 3 months correlation between Direxion and Schouw is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Schouw Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schouw 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 Schouw. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schouw has no effect on the direction of Direxion Daily i.e., Direxion Daily and Schouw go up and down completely randomly.

Pair Corralation between Direxion Daily and Schouw

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Schouw. In addition to that, Direxion Daily is 2.83 times more volatile than Schouw Co. It trades about -0.1 of its total potential returns per unit of risk. Schouw Co is currently generating about 0.21 per unit of volatility. If you would invest  53,800  in Schouw Co on December 30, 2024 and sell it today you would earn a total of  8,600  from holding Schouw Co or generate 15.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Direxion Daily Mid  vs.  Schouw Co

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.

Schouw

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Schouw Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Schouw displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and Schouw

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

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