Correlation Between SWP Growth and Direxion Daily

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

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

Diversification Opportunities for SWP Growth and Direxion Daily

0.97

Correlation Coefficient

SWP Growth  Direxion Daily

Almost no diversification

The 3 months correlation between SWP and Direxion is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding SWP Growth Income 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 SWP Growth 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 SWP Growth Income 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 SWP Growth i.e., SWP Growth and Direxion Daily go up and down completely randomly.

Pair Corralation between SWP Growth and Direxion Daily

Considering the 90-day investment horizon SWP Growth Income is expected to generate 0.19 times more return on investment than Direxion Daily. However, SWP Growth Income is 5.2 times less risky than Direxion Daily. It trades about -0.06 of its potential returns per unit of risk. Direxion Daily Technology is currently generating about -0.02 per unit of risk. If you would invest  2,598  in SWP Growth Income on February 3, 2025 and sell it today you would lose (167.00) from holding SWP Growth Income or give up 6.43% of portfolio value over 90 days.

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

SWP Growth Income  vs.  Direxion Daily Technology

SWP Growth Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days SWP Growth Income has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SWP Growth is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Direxion Daily Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with SWP Growth and Direxion Daily

The main advantage of trading using opposite SWP Growth and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWP Growth 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 SWP Growth Income 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.