Correlation Between VanEck Semiconductor and Direxion Daily

Can any of the company-specific risk be diversified away by investing in both VanEck Semiconductor 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 Semiconductor 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 Semiconductor ETF and Direxion Daily Semiconductor, you can compare the effects of market volatilities on VanEck Semiconductor 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 Semiconductor with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Semiconductor and Direxion Daily.

Diversification Opportunities for VanEck Semiconductor and Direxion Daily

0.99

Correlation Coefficient

VanEck Semiconductor  Direxion Daily

No risk reduction

The 3 months correlation between VanEck and Direxion is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Semiconductor ETF and Direxion Daily Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Semic and VanEck Semiconductor 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 Semiconductor ETF 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 Semic has no effect on the direction of VanEck Semiconductor i.e., VanEck Semiconductor and Direxion Daily go up and down completely randomly.

Pair Corralation between VanEck Semiconductor and Direxion Daily

Considering the 90-day investment horizon VanEck Semiconductor ETF is expected to generate 0.37 times more return on investment than Direxion Daily. However, VanEck Semiconductor ETF is 2.7 times less risky than Direxion Daily. It trades about -0.07 of its potential returns per unit of risk. Direxion Daily Semiconductor is currently generating about -0.1 per unit of risk. If you would invest  24,466  in VanEck Semiconductor ETF on December 28, 2024 and sell it today you would lose (2,691) from holding VanEck Semiconductor ETF or give up 11.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

VanEck Semiconductor ETF  vs.  Direxion Daily Semiconductor

VanEck Semiconductor ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Semiconductor ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's primary indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Direxion Daily Semic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Pair Trading with VanEck Semiconductor and Direxion Daily

The main advantage of trading using opposite VanEck Semiconductor and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Semiconductor 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 Semiconductor ETF and Direxion Daily Semiconductor 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.