Correlation Between Long Term and Direxion Large

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Can any of the company-specific risk be diversified away by investing in both Long Term and Direxion Large 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 Long Term and Direxion Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Long Term Bond and Direxion Large Caps, you can compare the effects of market volatilities on Long Term and Direxion Large 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 Long Term with a short position of Direxion Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Term and Direxion Large.

Diversification Opportunities for Long Term and Direxion Large

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Long Term and Direxion is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Long Term Bond and Direxion Large Caps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Large Caps and Long Term 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 Long Term Bond are associated (or correlated) with Direxion Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Large Caps has no effect on the direction of Long Term i.e., Long Term and Direxion Large go up and down completely randomly.

Pair Corralation between Long Term and Direxion Large

Considering the 90-day investment horizon Long Term Bond is expected to generate 0.23 times more return on investment than Direxion Large. However, Long Term Bond is 4.26 times less risky than Direxion Large. It trades about -0.4 of its potential returns per unit of risk. Direxion Large Caps is currently generating about -0.27 per unit of risk. If you would invest  7,911  in Long Term Bond on June 29, 2022 and sell it today you would lose (640.00)  from holding Long Term Bond or give up 8.09% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.24%
ValuesDaily Returns

Long Term Bond  vs.  Direxion Large Caps

 Performance (%) 
       Timeline  
Long Term Bond 
Long Term Performance
0 of 100
Over the last 90 days Long Term Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Long Term Price Channel

Direxion Large Caps 
Direxion Performance
0 of 100
Over the last 90 days Direxion Large Caps has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Direxion Large is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Direxion Price Channel

Long Term and Direxion Large Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Long Term and Direxion Large

The main advantage of trading using opposite Long Term and Direxion Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long Term position performs unexpectedly, Direxion Large 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 Large will offset losses from the drop in Direxion Large's long position.
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The idea behind Long Term Bond and Direxion Large Caps 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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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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