Correlation Between Direxion Daily and Spectra Systems

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

Diversification Opportunities for Direxion Daily and Spectra Systems

0.25

Correlation Coefficient

Direxion Daily  Spectra Systems

Modest diversification

The 3 months correlation between Direxion and Spectra is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Spectra Systems Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectra Systems Corp 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 Spectra Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectra Systems Corp has no effect on the direction of Direxion Daily i.e., Direxion Daily and Spectra Systems go up and down completely randomly.

Pair Corralation between Direxion Daily and Spectra Systems

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 1.29 times more return on investment than Spectra Systems. However, Direxion Daily is 1.29 times more volatile than Spectra Systems Corp. It trades about 0.17 of its potential returns per unit of risk. Spectra Systems Corp is currently generating about 0.02 per unit of risk. If you would invest  4,835  in Direxion Daily Mid on September 12, 2024 and sell it today you would earn a total of  1,544  from holding Direxion Daily Mid or generate 31.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Direxion Daily Mid  vs.  Spectra Systems Corp

Direxion Daily Mid

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 13 (%) 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.

Spectra Systems Corp

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Spectra Systems Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Spectra Systems is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Direxion Daily and Spectra Systems

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

The idea behind Direxion Daily Mid and Spectra Systems Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.