Correlation Between IShares 20 and Direxion Daily

Can any of the company-specific risk be diversified away by investing in both IShares 20 and Direxion Daily 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 IShares 20 and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 20 Year and Direxion Daily 20, you can compare the effects of market volatilities on IShares 20 and Direxion Daily 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 IShares 20 with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 20 and Direxion Daily.

Diversification Opportunities for IShares 20 and Direxion Daily

-1.0

Correlation Coefficient

IShares 20  Direxion Daily

Pay attention - limited upside

The 3 months correlation between IShares and Direxion is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares 20 Year and Direxion Daily 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily 20 and IShares 20 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 iShares 20 Year are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily 20 has no effect on the direction of IShares 20 i.e., IShares 20 and Direxion Daily go up and down completely randomly.

Pair Corralation between IShares 20 and Direxion Daily

Considering the 90-day investment horizon iShares 20 Year is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, iShares 20 Year is 2.97 times less risky than Direxion Daily. The etf trades about 0.0 of its potential returns per unit of risk. The Direxion Daily 20 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,160  in Direxion Daily 20 on September 20, 2024 and sell it today you would earn a total of  741.00  from holding Direxion Daily 20 or generate 23.45% return on investment over 90 days.

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

iShares 20 Year  vs.  Direxion Daily 20

iShares 20 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 20 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Direxion Daily 20

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily 20 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Direxion Daily showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares 20 and Direxion Daily

The main advantage of trading using opposite IShares 20 and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 20 position performs unexpectedly, Direxion Daily 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 Direxion Daily will offset losses from the drop in Direxion Daily's long position.

The idea behind iShares 20 Year and Direxion Daily 20 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.