Correlation Between Themes Global and Direxion Daily

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

By analyzing existing cross correlation between Themes Global Systemically and Direxion Daily Regional, you can compare the effects of market volatilities on Themes Global 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 Themes Global with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Themes Global and Direxion Daily.

Diversification Opportunities for Themes Global and Direxion Daily

0.85

Correlation Coefficient

Themes Global  Direxion Daily

Very poor diversification

The 3 months correlation between Themes and Direxion is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Themes Global Systemically and Direxion Daily Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Regional and Themes Global 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 Themes Global Systemically 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 Regional has no effect on the direction of Themes Global i.e., Themes Global and Direxion Daily go up and down completely randomly.

Pair Corralation between Themes Global and Direxion Daily

Given the investment horizon of 90 days Themes Global is expected to generate 2.06 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Themes Global Systemically is 5.22 times less risky than Direxion Daily. It trades about 0.35 of its potential returns per unit of risk. Direxion Daily Regional is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  6,963  in Direxion Daily Regional on May 1, 2025 and sell it today you would earn a total of  2,572  from holding Direxion Daily Regional or generate 36.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Themes Global Systemically  vs.  Direxion Daily Regional

Themes Global System

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Themes Global Systemically are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Themes Global sustained solid returns over the last few months and may actually be approaching a breakup point.

Direxion Daily Regional

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Regional are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Themes Global and Direxion Daily

The main advantage of trading using opposite Themes Global and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Themes Global 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.

The idea behind Themes Global Systemically and Direxion Daily Regional 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.