Correlation Between Alpha Architect and Direxion Daily

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

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

Diversification Opportunities for Alpha Architect and Direxion Daily

0.28

Correlation Coefficient

Alpha Architect  Direxion Daily

Modest diversification

The 3 months correlation between Alpha and Direxion is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Architect High and Direxion Daily Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Technology and Alpha Architect 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 Alpha Architect High 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 Technology has no effect on the direction of Alpha Architect i.e., Alpha Architect and Direxion Daily go up and down completely randomly.

Pair Corralation between Alpha Architect and Direxion Daily

Given the investment horizon of 90 days Alpha Architect is expected to generate 12.92 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Alpha Architect High is 18.8 times less risky than Direxion Daily. It trades about 0.08 of its potential returns per unit of risk. Direxion Daily Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  10,491  in Direxion Daily Technology on September 17, 2025 and sell it today you would earn a total of  920.00  from holding Direxion Daily Technology or generate 8.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alpha Architect High  vs.  Direxion Daily Technology

Alpha Architect High

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect High are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Alpha Architect is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Direxion Daily Technology

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental indicators, Direxion Daily disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha Architect and Direxion Daily

The main advantage of trading using opposite Alpha Architect and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Architect 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 Alpha Architect High and Direxion Daily Technology 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.