Correlation Between Direxion Daily and Barclays Capital

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

Diversification Opportunities for Direxion Daily and Barclays Capital

0.0

Correlation Coefficient

Direxion Daily  Barclays Capital

Pay attention - limited upside

The 3 months correlation between Direxion and Barclays is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP500 and Barclays Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays Capital 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 Barclays Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays Capital has no effect on the direction of Direxion Daily i.e., Direxion Daily and Barclays Capital go up and down completely randomly.

Pair Corralation between Direxion Daily and Barclays Capital

Given the investment horizon of 90 days Direxion Daily is expected to generate 1.05 times less return on investment than Barclays Capital. In addition to that, Direxion Daily is 1.91 times more volatile than Barclays Capital. It trades about 0.09 of its total potential returns per unit of risk. Barclays Capital is currently generating about 0.18 per unit of volatility. If you would invest  5,764  in Barclays Capital on October 7, 2024 and sell it today you would earn a total of  1,435  from holding Barclays Capital or generate 24.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	20.36%
Values	Daily Returns

Direxion Daily SP500  vs.  Barclays Capital

Direxion Daily SP500

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP500 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Barclays Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barclays Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking indicators, Barclays Capital is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Direxion Daily and Barclays Capital

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

The idea behind Direxion Daily SP500 and Barclays Capital 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.