Correlation Between Visa and Direxion Daily

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Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Direxion Daily CSI, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Direxion Daily.

Diversification Opportunities for Visa and Direxion Daily

VisaDirexionDiversified AwayVisaDirexionDiversified Away100%
-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Visa and Direxion is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Direxion Daily CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily CSI and Visa 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 Visa Class A 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 CSI has no effect on the direction of Visa i.e., Visa and Direxion Daily go up and down completely randomly.

Pair Corralation between Visa and Direxion Daily

Taking into account the 90-day investment horizon Visa is expected to generate 3.12 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Visa Class A is 5.55 times less risky than Direxion Daily. It trades about 0.12 of its potential returns per unit of risk. Direxion Daily CSI is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,957  in Direxion Daily CSI on September 23, 2024 and sell it today you would earn a total of  512.00  from holding Direxion Daily CSI or generate 17.31% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Visa Class A  vs.  Direxion Daily CSI

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 020406080100
JavaScript chart by amCharts 3.21.15V CWEB
       Timeline  
Visa Class A 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec280290300310320
Direxion Daily CSI 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily CSI are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Direxion Daily sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec354045505560

Visa and Direxion Daily Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.01-3.0-2.0-0.990.01681.062.133.24.28 0.050.100.150.20
JavaScript chart by amCharts 3.21.15V CWEB
       Returns  

Pair Trading with Visa and Direxion Daily

The main advantage of trading using opposite Visa and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A and Direxion Daily CSI 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.
Check out your portfolio center.
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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