Correlation Between T Rex and Direxion Daily

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

By analyzing existing cross correlation between T Rex 2X Long and Direxion Daily Energy, you can compare the effects of market volatilities on T Rex and Direxion Daily 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 T Rex with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rex and Direxion Daily.

Diversification Opportunities for T Rex and Direxion Daily

-0.71

Correlation Coefficient

T Rex  Direxion Daily

Pay attention - limited upside

The 3 months correlation between NVDX and Direxion is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding T Rex 2X Long and Direxion Daily Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Energy and T Rex 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 T Rex 2X Long are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Energy has no effect on the direction of T Rex i.e., T Rex and Direxion Daily go up and down completely randomly.

Pair Corralation between T Rex and Direxion Daily

Given the investment horizon of 90 days T Rex 2X Long is expected to generate 2.31 times more return on investment than Direxion Daily. However, T Rex is 2.31 times more volatile than Direxion Daily Energy. It trades about 0.07 of its potential returns per unit of risk. Direxion Daily Energy is currently generating about -0.05 per unit of risk. If you would invest  1,416  in T Rex 2X Long on August 30, 2024 and sell it today you would earn a total of  254.00  from holding T Rex 2X Long or generate 17.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

T Rex 2X Long  vs.  Direxion Daily Energy

T Rex 2X

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in T Rex 2X Long are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, T Rex showed solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with T Rex and Direxion Daily

The main advantage of trading using opposite T Rex and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rex position performs unexpectedly, Direxion Daily 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 Direxion Daily will offset losses from the drop in Direxion Daily's long position.

The idea behind T Rex 2X Long and Direxion Daily Energy 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.