Correlation Between Direxion Daily and Small Pany

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

Diversification Opportunities for Direxion Daily and Small Pany

0.99

Correlation Coefficient

Direxion Daily  Small Pany

No risk reduction

The 3 months correlation between Direxion and Small is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth 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 Small Pany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Direxion Daily i.e., Direxion Daily and Small Pany go up and down completely randomly.

Pair Corralation between Direxion Daily and Small Pany

Given the investment horizon of 90 days Direxion Daily Mid is expected to generate 2.29 times more return on investment than Small Pany. However, Direxion Daily is 2.29 times more volatile than Small Pany Growth. It trades about 0.19 of its potential returns per unit of risk. Small Pany Growth is currently generating about 0.17 per unit of risk. If you would invest  4,829  in Direxion Daily Mid on September 5, 2024 and sell it today you would earn a total of  1,791  from holding Direxion Daily Mid or generate 37.09% 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.  Small Pany Growth

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.

Small Pany Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Small Pany showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and Small Pany

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

The idea behind Direxion Daily Mid and Small Pany Growth 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.