Correlation Between Direxion Daily and BSDE

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

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

Diversification Opportunities for Direxion Daily and BSDE

0.5

Correlation Coefficient

Direxion Daily  BSDE

Very weak diversification

The 3 months correlation between Direxion and BSDE is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and BSDE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BSDE 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 NVDA are associated (or correlated) with BSDE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BSDE has no effect on the direction of Direxion Daily i.e., Direxion Daily and BSDE go up and down completely randomly.

Pair Corralation between Direxion Daily and BSDE

If you would invest  9,007  in Direxion Daily NVDA on October 7, 2024 and sell it today you would earn a total of  1,793  from holding Direxion Daily NVDA or generate 19.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.0%
Values	Daily Returns

Direxion Daily NVDA  vs.  BSDE

Direxion Daily NVDA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily NVDA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

BSDE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BSDE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BSDE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Direxion Daily and BSDE

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

The idea behind Direxion Daily NVDA and BSDE 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.