Correlation Between Direxion Daily and Simt Tax-managed

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

Diversification Opportunities for Direxion Daily and Simt Tax-managed

0.83

Correlation Coefficient

Direxion Daily  Simt Tax-managed

Very poor diversification

The 3 months correlation between Direxion and Simt is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Simt Tax Managed Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Tax Managed 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 Simt Tax-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Tax Managed has no effect on the direction of Direxion Daily i.e., Direxion Daily and Simt Tax-managed go up and down completely randomly.

Pair Corralation between Direxion Daily and Simt Tax-managed

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Simt Tax-managed. In addition to that, Direxion Daily is 3.94 times more volatile than Simt Tax Managed Large. It trades about -0.11 of its total potential returns per unit of risk. Simt Tax Managed Large is currently generating about -0.04 per unit of volatility. If you would invest  3,540  in Simt Tax Managed Large on December 28, 2024 and sell it today you would lose (86.00) from holding Simt Tax Managed Large or give up 2.43% 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.  Simt Tax Managed Large

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.

Simt Tax Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simt Tax Managed Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Simt Tax-managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and Simt Tax-managed

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

The idea behind Direxion Daily Mid and Simt Tax Managed Large 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.