Correlation Between Direxion Daily and AdvisorShares Dorsey

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

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

Diversification Opportunities for Direxion Daily and AdvisorShares Dorsey

0.12

Correlation Coefficient

Direxion Daily  AdvisorShares Dorsey

Average diversification

The 3 months correlation between Direxion and AdvisorShares is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Semiconductor and AdvisorShares Dorsey Wright in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Dorsey 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 Semiconductor are associated (or correlated) with AdvisorShares Dorsey. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Dorsey has no effect on the direction of Direxion Daily i.e., Direxion Daily and AdvisorShares Dorsey go up and down completely randomly.

Pair Corralation between Direxion Daily and AdvisorShares Dorsey

Given the investment horizon of 90 days Direxion Daily Semiconductor is expected to generate 6.25 times more return on investment than AdvisorShares Dorsey. However, Direxion Daily is 6.25 times more volatile than AdvisorShares Dorsey Wright. It trades about 0.04 of its potential returns per unit of risk. AdvisorShares Dorsey Wright is currently generating about 0.0 per unit of risk. If you would invest  2,239  in Direxion Daily Semiconductor on September 23, 2024 and sell it today you would earn a total of  72.00  from holding Direxion Daily Semiconductor or generate 3.22% return on investment over 90 days.

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

Direxion Daily Semiconductor  vs.  AdvisorShares Dorsey Wright

Direxion Daily Semic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Semiconductor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AdvisorShares Dorsey

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Dorsey Wright are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, AdvisorShares Dorsey is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Direxion Daily and AdvisorShares Dorsey

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

The idea behind Direxion Daily Semiconductor and AdvisorShares Dorsey Wright 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.