Correlation Between Victory Global and Direxion Daily

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

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

Diversification Opportunities for Victory Global and Direxion Daily

-0.22

Correlation Coefficient

Victory Global  Direxion Daily

Very good diversification

The 3 months correlation between Victory and Direxion is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Victory Global Natural and Direxion Daily FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily FTSE and Victory Global 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 Victory Global Natural 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 FTSE has no effect on the direction of Victory Global i.e., Victory Global and Direxion Daily go up and down completely randomly.

Pair Corralation between Victory Global and Direxion Daily

Assuming the 90 days horizon Victory Global Natural is expected to under-perform the Direxion Daily. But the mutual fund apears to be less risky and, when comparing its historical volatility, Victory Global Natural is 1.7 times less risky than Direxion Daily. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Direxion Daily FTSE is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,165  in Direxion Daily FTSE on November 27, 2024 and sell it today you would earn a total of  602.00  from holding Direxion Daily FTSE or generate 27.81% return on investment over 90 days.

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

Victory Global Natural  vs.  Direxion Daily FTSE

Victory Global Natural

Risk-Adjusted Performance

Very Weak

Over the last 90 days Victory Global Natural has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Direxion Daily FTSE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily FTSE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Direxion Daily disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Victory Global and Direxion Daily

The main advantage of trading using opposite Victory Global and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Victory Global 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 Victory Global Natural and Direxion Daily FTSE 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.