Correlation Between Direxion Daily and Vanguard Growth

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

Diversification Opportunities for Direxion Daily and Vanguard Growth

0.92

Correlation Coefficient

Direxion Daily  Vanguard Growth

Almost no diversification

The 3 months correlation between Direxion and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Vanguard Growth Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth Index 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 Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth Index has no effect on the direction of Direxion Daily i.e., Direxion Daily and Vanguard Growth go up and down completely randomly.

Pair Corralation between Direxion Daily and Vanguard Growth

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 2.98 times more return on investment than Vanguard Growth. However, Direxion Daily is 2.98 times more volatile than Vanguard Growth Index. It trades about 0.18 of its potential returns per unit of risk. Vanguard Growth Index is currently generating about 0.2 per unit of risk. If you would invest  4,993  in Direxion Daily Mid on September 3, 2024 and sell it today you would earn a total of  1,739  from holding Direxion Daily Mid or generate 34.83% return on investment over 90 days.

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

Direxion Daily Mid  vs.  Vanguard Growth Index

Direxion Daily Mid

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 14 (%) 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.

Vanguard Growth Index

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Direxion Daily and Vanguard Growth

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

The idea behind Direxion Daily Mid and Vanguard Growth Index 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.