Correlation Between IPath Series and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both IPath Series 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 IPath Series and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iPath Series B and Direxion Daily Gold, you can compare the effects of market volatilities on IPath Series 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 IPath Series with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of IPath Series and Direxion Daily.
Diversification Opportunities for IPath Series and Direxion Daily
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IPath and Direxion is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding iPath Series B and Direxion Daily Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Gold and IPath Series 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 iPath Series B 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 Gold has no effect on the direction of IPath Series i.e., IPath Series and Direxion Daily go up and down completely randomly.
Pair Corralation between IPath Series and Direxion Daily
Considering the 90-day investment horizon iPath Series B is expected to generate 1.14 times more return on investment than Direxion Daily. However, IPath Series is 1.14 times more volatile than Direxion Daily Gold. It trades about 0.04 of its potential returns per unit of risk. Direxion Daily Gold is currently generating about -0.27 per unit of risk. If you would invest 4,443 in iPath Series B on December 27, 2024 and sell it today you would earn a total of 275.00 from holding iPath Series B or generate 6.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
iPath Series B vs. Direxion Daily Gold
Performance |
Timeline |
iPath Series B |
Direxion Daily Gold |
IPath Series and Direxion Daily Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IPath Series and Direxion Daily
The main advantage of trading using opposite IPath Series and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IPath Series 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.IPath Series vs. ProShares Ultra VIX | IPath Series vs. ProShares Short VIX | IPath Series vs. ProShares UltraPro Short | IPath Series vs. iShares 20 Year |
Direxion Daily vs. Direxion Daily Gold | Direxion Daily vs. Direxion Daily Junior | Direxion Daily vs. Direxion Daily Junior | Direxion Daily vs. Direxion Daily SP |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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