Correlation Between Direxion Daily and Advisor Managed

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

Diversification Opportunities for Direxion Daily and Advisor Managed

0.81

Correlation Coefficient

Direxion Daily  Advisor Managed

Very poor diversification

The 3 months correlation between Direxion and Advisor is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP500 and Advisor Managed Portfolios in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisor Managed Port 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 Advisor Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisor Managed Port has no effect on the direction of Direxion Daily i.e., Direxion Daily and Advisor Managed go up and down completely randomly.

Pair Corralation between Direxion Daily and Advisor Managed

Given the investment horizon of 90 days Direxion Daily SP500 is expected to generate 1.56 times more return on investment than Advisor Managed. However, Direxion Daily is 1.56 times more volatile than Advisor Managed Portfolios. It trades about -0.04 of its potential returns per unit of risk. Advisor Managed Portfolios is currently generating about -0.07 per unit of risk. If you would invest  18,534  in Direxion Daily SP500 on December 1, 2024 and sell it today you would lose (1,447) from holding Direxion Daily SP500 or give up 7.81% of portfolio value over 90 days.

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

Direxion Daily SP500  vs.  Advisor Managed Portfolios

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 latest uncertain performance, the Etf's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Advisor Managed Port

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advisor Managed Portfolios has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Etf's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with Direxion Daily and Advisor Managed

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

The idea behind Direxion Daily SP500 and Advisor Managed Portfolios 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.