Correlation Between Direxion Daily and South Plains

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

Diversification Opportunities for Direxion Daily and South Plains

0.81

Correlation Coefficient

Direxion Daily  South Plains

Very poor diversification

The 3 months correlation between Direxion and South is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and South Plains Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Plains Financial 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 South Plains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Plains Financial has no effect on the direction of Direxion Daily i.e., Direxion Daily and South Plains go up and down completely randomly.

Pair Corralation between Direxion Daily and South Plains

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the South Plains. In addition to that, Direxion Daily is 1.76 times more volatile than South Plains Financial. It trades about -0.25 of its total potential returns per unit of risk. South Plains Financial is currently generating about -0.04 per unit of volatility. If you would invest  3,578  in South Plains Financial on December 2, 2024 and sell it today you would lose (54.00) from holding South Plains Financial or give up 1.51% of portfolio value over 90 days.

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

Direxion Daily Mid  vs.  South Plains Financial

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.

South Plains Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days South Plains Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Direxion Daily and South Plains

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

The idea behind Direxion Daily Mid and South Plains Financial 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 Anywhere module to track or share privately all of your investments from the convenience of any device.