Correlation Between First Trust and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and Direxion Daily SP, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Direxion Daily.
Diversification Opportunities for First Trust and Direxion Daily
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Direxion is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Direxion Daily SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP and First Trust 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 First Trust Exchange Traded 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 SP has no effect on the direction of First Trust i.e., First Trust and Direxion Daily go up and down completely randomly.
Pair Corralation between First Trust and Direxion Daily
Given the investment horizon of 90 days First Trust is expected to generate 5.13 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, First Trust Exchange Traded is 5.31 times less risky than Direxion Daily. It trades about 0.13 of its potential returns per unit of risk. Direxion Daily SP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,800 in Direxion Daily SP on April 15, 2025 and sell it today you would earn a total of 1,704 from holding Direxion Daily SP or generate 35.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Exchange Traded vs. Direxion Daily SP
Performance |
| Timeline |
| First Trust Exchange |
| Direxion Daily SP |
First Trust and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Direxion Daily
The main advantage of trading using opposite First Trust and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Expanded | First Trust vs. BlackRock Future Health | First Trust vs. SPDR SP Health |
| Direxion Daily vs. Direxion Daily SP | Direxion Daily vs. Direxion Daily Semiconductor | Direxion Daily vs. Direxion Daily Technology | Direxion Daily vs. Direxion Daily Small |
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 CEOs Directory module to screen CEOs from public companies around the world.
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