Correlation Between Direxion Daily and Zonetail

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

Diversification Opportunities for Direxion Daily and Zonetail

-0.49

Correlation Coefficient

Direxion Daily  Zonetail

Very good diversification

The 3 months correlation between Direxion and Zonetail is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Zonetail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zonetail 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 Zonetail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zonetail has no effect on the direction of Direxion Daily i.e., Direxion Daily and Zonetail go up and down completely randomly.

Pair Corralation between Direxion Daily and Zonetail

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Zonetail. But the etf apears to be less risky and, when comparing its historical volatility, Direxion Daily Mid is 2.49 times less risky than Zonetail. The etf trades about -0.1 of its potential returns per unit of risk. The Zonetail is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.79  in Zonetail on December 30, 2024 and sell it today you would earn a total of  0.61  from holding Zonetail or generate 77.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.38%
Values	Daily Returns

Direxion Daily Mid  vs.  Zonetail

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.

Zonetail

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zonetail are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, Zonetail reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and Zonetail

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

The idea behind Direxion Daily Mid and Zonetail 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.