Correlation Between Direxion Daily and Swan Hedged
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Swan Hedged 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 Swan Hedged into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Aerospace and Swan Hedged Equity, you can compare the effects of market volatilities on Direxion Daily and Swan Hedged 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 Swan Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Swan Hedged.
Diversification Opportunities for Direxion Daily and Swan Hedged
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Direxion and Swan is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Aerospace and Swan Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Hedged Equity 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 Aerospace are associated (or correlated) with Swan Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Hedged Equity has no effect on the direction of Direxion Daily i.e., Direxion Daily and Swan Hedged go up and down completely randomly.
Pair Corralation between Direxion Daily and Swan Hedged
Given the investment horizon of 90 days Direxion Daily Aerospace is expected to generate 8.65 times more return on investment than Swan Hedged. However, Direxion Daily is 8.65 times more volatile than Swan Hedged Equity. It trades about 0.17 of its potential returns per unit of risk. Swan Hedged Equity is currently generating about 0.16 per unit of risk. If you would invest 3,066 in Direxion Daily Aerospace on March 30, 2025 and sell it today you would earn a total of 2,044 from holding Direxion Daily Aerospace or generate 66.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Aerospace vs. Swan Hedged Equity
Performance |
| Timeline |
| Direxion Daily Aerospace |
| Swan Hedged Equity |
Direxion Daily and Swan Hedged Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Swan Hedged
The main advantage of trading using opposite Direxion Daily and Swan Hedged positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Swan Hedged 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 Swan Hedged will offset losses from the drop in Swan Hedged's long position.| Direxion Daily vs. Direxion Daily Homebuilders | Direxion Daily vs. Direxion Daily Transportation | Direxion Daily vs. Direxion Daily Regional | Direxion Daily vs. Direxion Daily Industrials |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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