Correlation Between IShares MSCI and Direxion Daily

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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 Global and Direxion Daily Regional, 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

  Correlation Coefficient

Very weak diversification

The 3 months correlation between IShares and Direxion is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding IShares MSCI Global and Direxion Daily Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Regional 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 Global 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 Regional 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

Given the investment horizon of 90 days IShares MSCI Global is expected to generate 0.16 times more return on investment than Direxion Daily. However, IShares MSCI Global is 6.4 times less risky than Direxion Daily. It trades about 0.0 of its potential returns per unit of risk. Direxion Daily Regional is currently generating about -0.16 per unit of risk. If you would invest  3,586  in IShares MSCI Global on November 24, 2023 and sell it today you would lose (5.00) from holding IShares MSCI Global or give up 0.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

IShares MSCI Global  vs.  Direxion Daily Regional

IShares MSCI Global 

Risk-Adjusted Performance

0 of 100

Very Weak
Over the last 90 days IShares MSCI Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, IShares MSCI is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.
Direxion Daily Regional 

Risk-Adjusted Performance

5 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Regional are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

IShares MSCI and Direxion Daily Volatility Contrast

   Predicted Return Density   

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.
The idea behind IShares MSCI Global and Direxion Daily Regional 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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