Correlation Between Vanguard FTSE and Direxion Daily

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

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

Diversification Opportunities for Vanguard FTSE and Direxion Daily

-0.26

Correlation Coefficient

Vanguard FTSE  Direxion Daily

Very good diversification

The 3 months correlation between Vanguard and Direxion is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging and Direxion Daily Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Trans and Vanguard FTSE 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 Vanguard FTSE Emerging 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 Trans has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Direxion Daily go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Direxion Daily

Considering the 90-day investment horizon Vanguard FTSE is expected to generate 2.76 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Vanguard FTSE Emerging is 3.77 times less risky than Direxion Daily. It trades about 0.05 of its potential returns per unit of risk. Direxion Daily Transportation is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,146  in Direxion Daily Transportation on October 5, 2024 and sell it today you would earn a total of  908.00  from holding Direxion Daily Transportation or generate 42.31% return on investment over 90 days.

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

Vanguard FTSE Emerging  vs.  Direxion Daily Transportation

Vanguard FTSE Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Direxion Daily Trans

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Direxion Daily is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Vanguard FTSE and Direxion Daily

The main advantage of trading using opposite Vanguard FTSE and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 Vanguard FTSE Emerging and Direxion Daily Transportation 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.