Correlation Between MicroSectorsTM Oil and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both MicroSectorsTM Oil 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 MicroSectorsTM Oil and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectorsTM Oil Gas and Direxion Daily Mid, you can compare the effects of market volatilities on MicroSectorsTM Oil 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 MicroSectorsTM Oil with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectorsTM Oil and Direxion Daily.
Diversification Opportunities for MicroSectorsTM Oil and Direxion Daily
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MicroSectorsTM and Direxion is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectorsTM Oil Gas and Direxion Daily Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Mid and MicroSectorsTM Oil 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 MicroSectorsTM Oil Gas 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 Mid has no effect on the direction of MicroSectorsTM Oil i.e., MicroSectorsTM Oil and Direxion Daily go up and down completely randomly.
Pair Corralation between MicroSectorsTM Oil and Direxion Daily
Given the investment horizon of 90 days MicroSectorsTM Oil Gas is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, MicroSectorsTM Oil Gas is 1.17 times less risky than Direxion Daily. The etf trades about -0.2 of its potential returns per unit of risk. The Direxion Daily Mid is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 5,305 in Direxion Daily Mid on January 26, 2024 and sell it today you would lose (518.00) from holding Direxion Daily Mid or give up 9.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
MicroSectorsTM Oil Gas vs. Direxion Daily Mid
Performance |
| Timeline |
| MicroSectorsTM Oil Gas |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Direxion Daily Mid |
MicroSectorsTM Oil and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectorsTM Oil and Direxion Daily
The main advantage of trading using opposite MicroSectorsTM Oil and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectorsTM Oil 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.| MicroSectorsTM Oil vs. MicroSectors Big Oil | MicroSectorsTM Oil vs. UBS ETRACS | MicroSectorsTM Oil vs. Drum Income Plus | MicroSectorsTM Oil vs. MicroSectors FANG Index |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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