Correlation Between Direxion Daily and IShares Global

Can any of the company-specific risk be diversified away by investing in both Direxion Daily and IShares Global 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 IShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Direxion Daily Select and iShares Global Tech, you can compare the effects of market volatilities on Direxion Daily and IShares Global 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 IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and IShares Global.

Diversification Opportunities for Direxion Daily and IShares Global

0.98

Correlation Coefficient

Direxion Daily  IShares Global

Almost no diversification

The 3 months correlation between Direxion and IShares is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Select and iShares Global Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Tech 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 Select are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Tech has no effect on the direction of Direxion Daily i.e., Direxion Daily and IShares Global go up and down completely randomly.

Pair Corralation between Direxion Daily and IShares Global

Given the investment horizon of 90 days Direxion Daily Select is expected to generate 2.22 times more return on investment than IShares Global. However, Direxion Daily is 2.22 times more volatile than iShares Global Tech. It trades about 0.25 of its potential returns per unit of risk. iShares Global Tech is currently generating about 0.32 per unit of risk. If you would invest  15,389  in Direxion Daily Select on May 7, 2025 and sell it today you would earn a total of  6,093  from holding Direxion Daily Select or generate 39.59% 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 Select  vs.  iShares Global Tech

Direxion Daily Select

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Select are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Direxion Daily reported solid returns over the last few months and may actually be approaching a breakup point.

iShares Global Tech

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Tech are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, IShares Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Direxion Daily and IShares Global

The main advantage of trading using opposite Direxion Daily and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, IShares Global 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 IShares Global will offset losses from the drop in IShares Global's long position.

The idea behind Direxion Daily Select and iShares Global Tech 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.