Correlation Between Direxion Daily and Drum Income

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

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

Diversification Opportunities for Direxion Daily and Drum Income

0.43

Correlation Coefficient

Direxion Daily  Drum Income

Very weak diversification

The 3 months correlation between Direxion and Drum is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and Drum Income Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drum Income Plus and Direxion Daily 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 Direxion Daily SP are associated (or correlated) with Drum Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drum Income Plus has no effect on the direction of Direxion Daily i.e., Direxion Daily and Drum Income go up and down completely randomly.

Pair Corralation between Direxion Daily and Drum Income

Given the investment horizon of 90 days Direxion Daily SP is expected to under-perform the Drum Income. In addition to that, Direxion Daily is 2.11 times more volatile than Drum Income Plus. It trades about -0.01 of its total potential returns per unit of risk. Drum Income Plus is currently generating about 0.26 per unit of volatility. If you would invest  803.00  in Drum Income Plus on February 5, 2024 and sell it today you would earn a total of  115.00  from holding Drum Income Plus or generate 14.32% return on investment over 90 days.

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

Direxion Daily SP  vs.  Drum Income Plus

Direxion Daily SP

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Direxion Daily is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Drum Income Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Drum Income Plus has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Etf's forward indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with Direxion Daily and Drum Income

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

The idea behind Direxion Daily SP and Drum Income Plus 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.