Correlation Between Direxion Daily and Vanguard Mid

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Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Vanguard Mid 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 Vanguard Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Mid and Vanguard Mid Cap Index, you can compare the effects of market volatilities on Direxion Daily and Vanguard Mid 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 Vanguard Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Vanguard Mid.

Diversification Opportunities for Direxion Daily and Vanguard Mid

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between Direxion and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Vanguard Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap 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 Mid are associated (or correlated) with Vanguard Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Direxion Daily i.e., Direxion Daily and Vanguard Mid go up and down completely randomly.

Pair Corralation between Direxion Daily and Vanguard Mid

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Vanguard Mid. In addition to that, Direxion Daily is 3.43 times more volatile than Vanguard Mid Cap Index. It trades about -0.3 of its total potential returns per unit of risk. Vanguard Mid Cap Index is currently generating about -0.28 per unit of volatility. If you would invest  24,585  in Vanguard Mid Cap Index on January 22, 2024 and sell it today you would lose (1,086) from holding Vanguard Mid Cap Index or give up 4.42% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Direxion Daily Mid  vs.  Vanguard Mid Cap Index

 Performance 
       Timeline  
Direxion Daily Mid 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Mid are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Direxion Daily is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Vanguard Mid Cap 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard Mid is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Direxion Daily and Vanguard Mid Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Direxion Daily and Vanguard Mid

The main advantage of trading using opposite Direxion Daily and Vanguard Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Vanguard Mid 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 Vanguard Mid will offset losses from the drop in Vanguard Mid's long position.
The idea behind Direxion Daily Mid and Vanguard Mid Cap Index 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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