Correlation Between UBS ETRACS and Direxion Daily

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

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

Diversification Opportunities for UBS ETRACS and Direxion Daily

-0.54

Correlation Coefficient

UBS ETRACS  Direxion Daily

Excellent diversification

The 3 months correlation between UBS and Direxion is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and Direxion Daily Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Technology and UBS ETRACS 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 UBS ETRACS 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 Technology has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and Direxion Daily go up and down completely randomly.

Pair Corralation between UBS ETRACS and Direxion Daily

Given the investment horizon of 90 days UBS ETRACS is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, UBS ETRACS is 1.07 times less risky than Direxion Daily. The etf trades about -0.01 of its potential returns per unit of risk. The Direxion Daily Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,550  in Direxion Daily Technology on September 12, 2024 and sell it today you would earn a total of  4,022  from holding Direxion Daily Technology or generate 72.47% return on investment over 90 days.

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

UBS ETRACS   vs.  Direxion Daily Technology

UBS ETRACS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UBS ETRACS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Direxion Daily Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Direxion Daily disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UBS ETRACS and Direxion Daily

The main advantage of trading using opposite UBS ETRACS and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UBS ETRACS 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 UBS ETRACS and Direxion Daily Technology 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.