Correlation Between VanEck Oil and Direxion Daily

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

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

Diversification Opportunities for VanEck Oil and Direxion Daily

-0.9

Correlation Coefficient

VanEck Oil  Direxion Daily

Pay attention - limited upside

The 3 months correlation between VanEck and Direxion is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Oil Services and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and VanEck Oil 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 VanEck Oil Services 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 SP has no effect on the direction of VanEck Oil i.e., VanEck Oil and Direxion Daily go up and down completely randomly.

Pair Corralation between VanEck Oil and Direxion Daily

Considering the 90-day investment horizon VanEck Oil Services is not expected to generate positive returns. However, VanEck Oil Services is 2.11 times less risky than Direxion Daily. It waists most of its returns potential to compensate for thr risk taken. Direxion Daily is generating about 0.04 per unit of risk. If you would invest  1,029  in Direxion Daily SP on October 9, 2024 and sell it today you would earn a total of  14.00  from holding Direxion Daily SP or generate 1.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

VanEck Oil Services  vs.  Direxion Daily SP

VanEck Oil Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Oil Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, VanEck Oil is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Direxion Daily SP

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Direxion Daily is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with VanEck Oil and Direxion Daily

The main advantage of trading using opposite VanEck Oil and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Oil 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 VanEck Oil Services and Direxion Daily SP 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.