Correlation Between United States and Direxion Daily

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

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

Diversification Opportunities for United States and Direxion Daily

0.94

Correlation Coefficient

United States  Direxion Daily

Almost no diversification

The 3 months correlation between United and Direxion is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding United States Oil and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and United States 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 United States Oil 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 SP has no effect on the direction of United States i.e., United States and Direxion Daily go up and down completely randomly.

Pair Corralation between United States and Direxion Daily

Considering the 90-day investment horizon United States is expected to generate 2.33 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, United States Oil is 2.14 times less risky than Direxion Daily. It trades about 0.01 of its potential returns per unit of risk. Direxion Daily SP is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,694  in Direxion Daily SP on December 29, 2024 and sell it today you would lose (45.00) from holding Direxion Daily SP or give up 1.67% of portfolio value over 90 days.

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

United States Oil  vs.  Direxion Daily SP

United States Oil

Risk-Adjusted Performance

Very Weak

Over the last 90 days United States Oil has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, United States is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Direxion Daily SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily SP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Direxion Daily is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with United States and Direxion Daily

The main advantage of trading using opposite United States and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Oil and Direxion Daily SP 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..