Correlation Between Direxion Daily and AdvisorShares Ranger

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

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

Diversification Opportunities for Direxion Daily and AdvisorShares Ranger

0.97

Correlation Coefficient

Direxion Daily  AdvisorShares Ranger

Almost no diversification

The 3 months correlation between Direxion and AdvisorShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and AdvisorShares Ranger Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Ranger 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 SP are associated (or correlated) with AdvisorShares Ranger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Ranger has no effect on the direction of Direxion Daily i.e., Direxion Daily and AdvisorShares Ranger go up and down completely randomly.

Pair Corralation between Direxion Daily and AdvisorShares Ranger

Given the investment horizon of 90 days Direxion Daily SP is expected to generate 0.6 times more return on investment than AdvisorShares Ranger. However, Direxion Daily SP is 1.67 times less risky than AdvisorShares Ranger. It trades about -0.14 of its potential returns per unit of risk. AdvisorShares Ranger Equity is currently generating about -0.22 per unit of risk. If you would invest  1,148  in Direxion Daily SP on September 12, 2024 and sell it today you would lose (65.00) from holding Direxion Daily SP or give up 5.66% of portfolio value over 90 days.

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

Direxion Daily SP  vs.  AdvisorShares Ranger Equity

Direxion Daily SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Direxion Daily is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

AdvisorShares Ranger

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdvisorShares Ranger Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with Direxion Daily and AdvisorShares Ranger

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

The idea behind Direxion Daily SP and AdvisorShares Ranger Equity 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.

Check out your portfolio center.

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.