Correlation Between Direxion Daily and ALPS

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

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

Diversification Opportunities for Direxion Daily and ALPS

0.77

Correlation Coefficient

Direxion Daily  ALPS

Poor diversification

The 3 months correlation between Direxion and ALPS is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Travel and ALPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPS 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 Travel are associated (or correlated) with ALPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPS has no effect on the direction of Direxion Daily i.e., Direxion Daily and ALPS go up and down completely randomly.

Pair Corralation between Direxion Daily and ALPS

If you would invest  1,896  in Direxion Daily Travel on September 20, 2024 and sell it today you would earn a total of  8.00  from holding Direxion Daily Travel or generate 0.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

Direxion Daily Travel  vs.  ALPS

Direxion Daily Travel

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Travel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Direxion Daily displayed solid returns over the last few months and may actually be approaching a breakup point.

ALPS

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days ALPS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, ALPS showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and ALPS

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

The idea behind Direxion Daily Travel and ALPS 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.