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

0.39

Correlation Coefficient

IPath Series  Direxion Daily

Weak diversification

The 3 months correlation between IPath and Direxion is 0.39. 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 1.18 times more return on investment than Direxion Daily. However, IPath Series is 1.18 times more volatile than Direxion Daily Gold. It trades about 0.09 of its potential returns per unit of risk. Direxion Daily Gold is currently generating about -0.07 per unit of risk. If you would invest  4,233  in iPath Series B on December 4, 2024 and sell it today you would earn a total of  790.00  from holding iPath Series B or generate 18.66% return on investment over 90 days.

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

iPath Series B  vs.  Direxion Daily Gold

iPath Series B

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iPath Series B are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, IPath Series showed solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

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.

The idea behind iPath Series B and Direxion Daily Gold 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.