Correlation Between IShares MSCI and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 IShares MSCI and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI EAFE and Direxion Daily FTSE, you can compare the effects of market volatilities on IShares MSCI 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 IShares MSCI with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Direxion Daily.
Diversification Opportunities for IShares MSCI and Direxion Daily
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Direxion is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI EAFE and Direxion Daily FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily FTSE and IShares MSCI 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 iShares MSCI EAFE 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 FTSE has no effect on the direction of IShares MSCI i.e., IShares MSCI and Direxion Daily go up and down completely randomly.
Pair Corralation between IShares MSCI and Direxion Daily
Considering the 90-day investment horizon iShares MSCI EAFE is expected to under-perform the Direxion Daily. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI EAFE is 5.0 times less risky than Direxion Daily. The etf trades about -0.15 of its potential returns per unit of risk. The Direxion Daily FTSE is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,860 in Direxion Daily FTSE on January 26, 2024 and sell it today you would earn a total of 300.00 from holding Direxion Daily FTSE or generate 16.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares MSCI EAFE vs. Direxion Daily FTSE
Performance |
| Timeline |
| iShares MSCI EAFE |
| Direxion Daily FTSE |
IShares MSCI and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares MSCI and Direxion Daily
The main advantage of trading using opposite IShares MSCI and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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.| IShares MSCI vs. SPDR MSCI Emerging | IShares MSCI vs. SPDR MSCI USA | IShares MSCI vs. SPDR MSCI World | IShares MSCI vs. SPDR SSGA Large |
| Direxion Daily vs. Direxion Daily FTSE | Direxion Daily vs. Direxion Daily MSCI | Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily MSCI |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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