Correlation Between Direxion Daily and Columbia Emerging

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

By analyzing existing cross correlation between Direxion Daily SP500 and Columbia Emerging Markets, you can compare the effects of market volatilities on Direxion Daily and Columbia Emerging 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 Columbia Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Columbia Emerging.

Diversification Opportunities for Direxion Daily and Columbia Emerging

-0.37

Correlation Coefficient

Direxion Daily  Columbia Emerging

Very good diversification

The 3 months correlation between Direxion and Columbia is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP500 and Columbia Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Emerging Markets 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 SP500 are associated (or correlated) with Columbia Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Emerging Markets has no effect on the direction of Direxion Daily i.e., Direxion Daily and Columbia Emerging go up and down completely randomly.

Pair Corralation between Direxion Daily and Columbia Emerging

Given the investment horizon of 90 days Direxion Daily SP500 is expected to under-perform the Columbia Emerging. In addition to that, Direxion Daily is 2.87 times more volatile than Columbia Emerging Markets. It trades about -0.1 of its total potential returns per unit of risk. Columbia Emerging Markets is currently generating about 0.09 per unit of volatility. If you would invest  2,104  in Columbia Emerging Markets on December 23, 2024 and sell it today you would earn a total of  116.00  from holding Columbia Emerging Markets or generate 5.51% return on investment over 90 days.

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

Direxion Daily SP500  vs.  Columbia Emerging Markets

Direxion Daily SP500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily SP500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Columbia Emerging Markets

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Emerging Markets are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Columbia Emerging is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and Columbia Emerging

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

The idea behind Direxion Daily SP500 and Columbia Emerging Markets 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..