Correlation Between Direxion and Global X

Can any of the company-specific risk be diversified away by investing in both Direxion and Global X 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 and Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Direxion and Global X Hydrogen, you can compare the effects of market volatilities on Direxion and Global X 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 with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion and Global X.

Diversification Opportunities for Direxion and Global X

0.38

Correlation Coefficient

Direxion  Global X

Weak diversification

The 3 months correlation between Direxion and Global is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Direxion and Global X Hydrogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Hydrogen and Direxion 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 are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Hydrogen has no effect on the direction of Direxion i.e., Direxion and Global X go up and down completely randomly.

Pair Corralation between Direxion and Global X

If you would invest  2,356  in Global X Hydrogen on September 3, 2024 and sell it today you would earn a total of  204.00  from holding Global X Hydrogen or generate 8.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Direxion  vs.  Global X Hydrogen

Direxion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Direxion is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Global X Hydrogen

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Hydrogen are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Direxion and Global X

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

The idea behind Direxion and Global X Hydrogen 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.