Correlation Between Technology Select and Direxion

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

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

Diversification Opportunities for Technology Select and Direxion

0.0

Correlation Coefficient

Technology Select  Direxion

Pay attention - limited upside

The 3 months correlation between Technology and Direxion is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion and Technology Select 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 Technology Select Sector are associated (or correlated) with Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of Technology Select i.e., Technology Select and Direxion go up and down completely randomly.

Pair Corralation between Technology Select and Direxion

If you would invest (100.00) in Direxion on December 3, 2024 and sell it today you would earn a total of  100.00  from holding Direxion or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Technology Select Sector  vs.  Direxion

Technology Select Sector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Technology Select Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Technology Select is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Direxion

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Direxion is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Technology Select and Direxion

The main advantage of trading using opposite Technology Select and Direxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Select position performs unexpectedly, Direxion 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 will offset losses from the drop in Direxion's long position.

The idea behind Technology Select Sector and Direxion 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..