Correlation Between Direxion Daily and VanEck Indonesia

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

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

Diversification Opportunities for Direxion Daily and VanEck Indonesia

0.8

Correlation Coefficient

Direxion Daily  VanEck Indonesia

Very poor diversification

The 3 months correlation between Direxion and VanEck is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Technology and VanEck Indonesia Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Indonesia Index 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 Technology are associated (or correlated) with VanEck Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Indonesia Index has no effect on the direction of Direxion Daily i.e., Direxion Daily and VanEck Indonesia go up and down completely randomly.

Pair Corralation between Direxion Daily and VanEck Indonesia

Given the investment horizon of 90 days Direxion Daily Technology is expected to under-perform the VanEck Indonesia. In addition to that, Direxion Daily is 2.76 times more volatile than VanEck Indonesia Index. It trades about -0.1 of its total potential returns per unit of risk. VanEck Indonesia Index is currently generating about -0.14 per unit of volatility. If you would invest  1,487  in VanEck Indonesia Index on December 28, 2024 and sell it today you would lose (223.00) from holding VanEck Indonesia Index or give up 15.0% of portfolio value over 90 days.

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

Direxion Daily Technology  vs.  VanEck Indonesia Index

Direxion Daily Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Etf's fundamental 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.

VanEck Indonesia Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Indonesia Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Direxion Daily and VanEck Indonesia

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

The idea behind Direxion Daily Technology and VanEck Indonesia Index 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.