Correlation Between PIMCO RAFI and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both PIMCO RAFI 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 PIMCO RAFI and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PIMCO RAFI Dynamic and Direxion Daily Junior, you can compare the effects of market volatilities on PIMCO RAFI 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 PIMCO RAFI with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of PIMCO RAFI and Direxion Daily.
Diversification Opportunities for PIMCO RAFI and Direxion Daily
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PIMCO and Direxion is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic and Direxion Daily Junior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Junior and PIMCO RAFI 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 PIMCO RAFI Dynamic 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 Junior has no effect on the direction of PIMCO RAFI i.e., PIMCO RAFI and Direxion Daily go up and down completely randomly.
Pair Corralation between PIMCO RAFI and Direxion Daily
Given the investment horizon of 90 days PIMCO RAFI is expected to generate 1.13 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, PIMCO RAFI Dynamic is 5.26 times less risky than Direxion Daily. It trades about 0.02 of its potential returns per unit of risk. Direxion Daily Junior is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 5,942 in Direxion Daily Junior on January 25, 2024 and sell it today you would lose (2,227) from holding Direxion Daily Junior or give up 37.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
PIMCO RAFI Dynamic vs. Direxion Daily Junior
Performance |
| Timeline |
| PIMCO RAFI Dynamic |
| Direxion Daily Junior |
PIMCO RAFI and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PIMCO RAFI and Direxion Daily
The main advantage of trading using opposite PIMCO RAFI and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI 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.| PIMCO RAFI vs. Pfizer Inc | PIMCO RAFI vs. LSI Industries | PIMCO RAFI vs. Retirement Living Through | PIMCO RAFI vs. HP Inc |
| Direxion Daily vs. Direxion Daily Junior | Direxion Daily vs. Direxion Daily Gold | Direxion Daily vs. Direxion Daily Gold | Direxion Daily vs. Direxion Daily SP |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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