Correlation Between Direxion Daily and Themes Lithium

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

By analyzing existing cross correlation between Direxion Daily Gold and Themes Lithium Battery, you can compare the effects of market volatilities on Direxion Daily and Themes Lithium 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 Themes Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Themes Lithium.

Diversification Opportunities for Direxion Daily and Themes Lithium

-0.14

Correlation Coefficient

Direxion Daily  Themes Lithium

Good diversification

The 3 months correlation between Direxion and Themes is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Gold and Themes Lithium Battery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Lithium Battery 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 Gold are associated (or correlated) with Themes Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Lithium Battery has no effect on the direction of Direxion Daily i.e., Direxion Daily and Themes Lithium go up and down completely randomly.

Pair Corralation between Direxion Daily and Themes Lithium

Given the investment horizon of 90 days Direxion Daily is expected to generate 6.79 times less return on investment than Themes Lithium. In addition to that, Direxion Daily is 1.42 times more volatile than Themes Lithium Battery. It trades about 0.01 of its total potential returns per unit of risk. Themes Lithium Battery is currently generating about 0.1 per unit of volatility. If you would invest  2,684  in Themes Lithium Battery on September 5, 2024 and sell it today you would earn a total of  346.00  from holding Themes Lithium Battery or generate 12.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	79.69%
Values	Daily Returns

Direxion Daily Gold  vs.  Themes Lithium Battery

Direxion Daily Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Direxion Daily is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Themes Lithium Battery

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Lithium Battery are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain primary indicators, Themes Lithium demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and Themes Lithium

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

The idea behind Direxion Daily Gold and Themes Lithium Battery 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 Anywhere module to track or share privately all of your investments from the convenience of any device.