Correlation Between Direxion Daily and SPDR Galaxy
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and SPDR Galaxy 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 SPDR Galaxy 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 SPDR Galaxy Transformative, you can compare the effects of market volatilities on Direxion Daily and SPDR Galaxy 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 SPDR Galaxy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and SPDR Galaxy.
Diversification Opportunities for Direxion Daily and SPDR Galaxy
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Direxion and SPDR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Aerospace and SPDR Galaxy Transformative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Galaxy Transfor 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 SPDR Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Galaxy Transfor has no effect on the direction of Direxion Daily i.e., Direxion Daily and SPDR Galaxy go up and down completely randomly.
Pair Corralation between Direxion Daily and SPDR Galaxy
Given the investment horizon of 90 days Direxion Daily Aerospace is expected to generate 1.19 times more return on investment than SPDR Galaxy. However, Direxion Daily is 1.19 times more volatile than SPDR Galaxy Transformative. It trades about 0.37 of its potential returns per unit of risk. SPDR Galaxy Transformative is currently generating about 0.37 per unit of risk. If you would invest 4,762 in Direxion Daily Aerospace on April 22, 2025 and sell it today you would earn a total of 1,028 from holding Direxion Daily Aerospace or generate 21.59% 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. SPDR Galaxy Transformative
Performance |
Timeline |
Direxion Daily Aerospace |
SPDR Galaxy Transfor |
Direxion Daily and SPDR Galaxy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Direxion Daily and SPDR Galaxy
The main advantage of trading using opposite Direxion Daily and SPDR Galaxy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, SPDR Galaxy 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 SPDR Galaxy will offset losses from the drop in SPDR Galaxy'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 |
SPDR Galaxy vs. Vanguard Information Technology | SPDR Galaxy vs. Technology Select Sector | SPDR Galaxy vs. iShares Technology ETF | SPDR Galaxy vs. iShares Semiconductor ETF |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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