Correlation Between Direxion Daily and Short Duration
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Short Duration 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 Short Duration 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 Short Duration Income, you can compare the effects of market volatilities on Direxion Daily and Short Duration 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 Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Short Duration.
Diversification Opportunities for Direxion Daily and Short Duration
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and Short is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Short Duration Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Income 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 Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Income has no effect on the direction of Direxion Daily i.e., Direxion Daily and Short Duration go up and down completely randomly.
Pair Corralation between Direxion Daily and Short Duration
Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Short Duration. In addition to that, Direxion Daily is 34.2 times more volatile than Short Duration Income. It trades about -0.25 of its total potential returns per unit of risk. Short Duration Income is currently generating about 0.16 per unit of volatility. If you would invest 1,196 in Short Duration Income on December 2, 2024 and sell it today you would earn a total of 3.00 from holding Short Duration Income or generate 0.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Direxion Daily Mid vs. Short Duration Income
Performance |
Timeline |
Direxion Daily Mid |
Short Duration Income |
Direxion Daily and Short Duration Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Direxion Daily and Short Duration
The main advantage of trading using opposite Direxion Daily and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration's long position.Direxion Daily vs. Direxion Daily Retail | Direxion Daily vs. Direxion Daily Industrials | Direxion Daily vs. Direxion Daily Transportation | Direxion Daily vs. Direxion Daily FTSE |
Short Duration vs. Short Duration Income | Short Duration vs. Doubleline Total Return | Short Duration vs. Janus Short Term Bond | Short Duration vs. Ab Sustainable Thematic |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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