Correlation Between Direxion Daily and SEI Select

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

By analyzing existing cross correlation between Direxion Daily SP500 and SEI Select Emerging, you can compare the effects of market volatilities on Direxion Daily and SEI Select 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 SEI Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and SEI Select.

Diversification Opportunities for Direxion Daily and SEI Select

0.97

Correlation Coefficient

Direxion Daily  SEI Select

Almost no diversification

The 3 months correlation between Direxion and SEI is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP500 and SEI Select Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Select Emerging 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 SP500 are associated (or correlated) with SEI Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Select Emerging has no effect on the direction of Direxion Daily i.e., Direxion Daily and SEI Select go up and down completely randomly.

Pair Corralation between Direxion Daily and SEI Select

Given the investment horizon of 90 days Direxion Daily SP500 is expected to generate 2.78 times more return on investment than SEI Select. However, Direxion Daily is 2.78 times more volatile than SEI Select Emerging. It trades about 0.22 of its potential returns per unit of risk. SEI Select Emerging is currently generating about 0.18 per unit of risk. If you would invest  13,042  in Direxion Daily SP500 on May 6, 2025 and sell it today you would earn a total of  4,423  from holding Direxion Daily SP500 or generate 33.91% 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 SP500  vs.  SEI Select Emerging

Direxion Daily SP500

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP500 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Direxion Daily disclosed solid returns over the last few months and may actually be approaching a breakup point.

SEI Select Emerging

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Select Emerging are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile technical and fundamental indicators, SEI Select may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Direxion Daily and SEI Select

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

The idea behind Direxion Daily SP500 and SEI Select Emerging 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.