Correlation Between Direxion Daily and KraneShares SSE

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

By analyzing existing cross correlation between Direxion Daily 20 and KraneShares SSE STAR, you can compare the effects of market volatilities on Direxion Daily and KraneShares SSE 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 KraneShares SSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and KraneShares SSE.

Diversification Opportunities for Direxion Daily and KraneShares SSE

-0.84

Correlation Coefficient

Direxion Daily  KraneShares SSE

Pay attention - limited upside

The 3 months correlation between Direxion and KraneShares is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily 20 and KraneShares SSE STAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares SSE STAR 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 20 are associated (or correlated) with KraneShares SSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares SSE STAR has no effect on the direction of Direxion Daily i.e., Direxion Daily and KraneShares SSE go up and down completely randomly.

Pair Corralation between Direxion Daily and KraneShares SSE

Considering the 90-day investment horizon Direxion Daily 20 is expected to under-perform the KraneShares SSE. In addition to that, Direxion Daily is 1.16 times more volatile than KraneShares SSE STAR. It trades about -0.06 of its total potential returns per unit of risk. KraneShares SSE STAR is currently generating about 0.06 per unit of volatility. If you would invest  1,327  in KraneShares SSE STAR on December 22, 2024 and sell it today you would earn a total of  78.00  from holding KraneShares SSE STAR or generate 5.88% return on investment over 90 days.

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

Direxion Daily 20  vs.  KraneShares SSE STAR

Direxion Daily 20

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily 20 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's primary indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

KraneShares SSE STAR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares SSE STAR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, KraneShares SSE may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Direxion Daily and KraneShares SSE

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

The idea behind Direxion Daily 20 and KraneShares SSE STAR 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.