Correlation Between Direxion Daily and PFA Invest

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

By analyzing existing cross correlation between Direxion Daily 20 and PFA Invest Balance, you can compare the effects of market volatilities on Direxion Daily and PFA Invest 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 PFA Invest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and PFA Invest.

Diversification Opportunities for Direxion Daily and PFA Invest

-0.18

Correlation Coefficient

Direxion Daily  PFA Invest

Good diversification

The 3 months correlation between Direxion and PFA is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily 20 and PFA Invest Balance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFA Invest Balance 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 20 are associated (or correlated) with PFA Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PFA Invest Balance has no effect on the direction of Direxion Daily i.e., Direxion Daily and PFA Invest go up and down completely randomly.

Pair Corralation between Direxion Daily and PFA Invest

Considering the 90-day investment horizon Direxion Daily 20 is expected to under-perform the PFA Invest. In addition to that, Direxion Daily is 7.53 times more volatile than PFA Invest Balance. It trades about -0.11 of its total potential returns per unit of risk. PFA Invest Balance is currently generating about 0.29 per unit of volatility. If you would invest  13,202  in PFA Invest Balance on January 17, 2024 and sell it today you would earn a total of  838.00  from holding PFA Invest Balance or generate 6.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Direxion Daily 20  vs.  PFA Invest Balance

Direxion Daily 20

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily 20 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Etf's primary indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

PFA Invest Balance

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PFA Invest Balance are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PFA Invest may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Direxion Daily and PFA Invest

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

The idea behind Direxion Daily 20 and PFA Invest Balance 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.