Correlation Between Direxion Daily and IShares Exponential

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

Diversification Opportunities for Direxion Daily and IShares Exponential

-0.25

Correlation Coefficient

Direxion Daily  IShares Exponential

Very good diversification

The 3 months correlation between Direxion and IShares is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily 20 and iShares Exponential Technologi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Exponential 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 IShares Exponential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Exponential has no effect on the direction of Direxion Daily i.e., Direxion Daily and IShares Exponential go up and down completely randomly.

Pair Corralation between Direxion Daily and IShares Exponential

Considering the 90-day investment horizon Direxion Daily 20 is expected to generate 1.83 times more return on investment than IShares Exponential. However, Direxion Daily is 1.83 times more volatile than iShares Exponential Technologies. It trades about 0.64 of its potential returns per unit of risk. iShares Exponential Technologies is currently generating about -0.12 per unit of risk. If you would invest  3,254  in Direxion Daily 20 on October 10, 2024 and sell it today you would earn a total of  962.00  from holding Direxion Daily 20 or generate 29.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Direxion Daily 20  vs.  iShares Exponential Technologi

Direxion Daily 20

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily 20 are ranked lower than 13 (%) 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.

iShares Exponential

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Direxion Daily and IShares Exponential

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

The idea behind Direxion Daily 20 and iShares Exponential Technologies 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.