Correlation Between Direxion Daily and SPDR Barclays

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

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

Diversification Opportunities for Direxion Daily and SPDR Barclays

0.76

Correlation Coefficient

Direxion Daily  SPDR Barclays

Poor diversification

The 3 months correlation between Direxion and SPDR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Technology and SPDR Barclays Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Barclays Short 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 Technology are associated (or correlated) with SPDR Barclays. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Barclays Short has no effect on the direction of Direxion Daily i.e., Direxion Daily and SPDR Barclays go up and down completely randomly.

Pair Corralation between Direxion Daily and SPDR Barclays

Given the investment horizon of 90 days Direxion Daily Technology is expected to generate 25.82 times more return on investment than SPDR Barclays. However, Direxion Daily is 25.82 times more volatile than SPDR Barclays Short. It trades about 0.2 of its potential returns per unit of risk. SPDR Barclays Short is currently generating about 0.28 per unit of risk. If you would invest  9,511  in Direxion Daily Technology on July 6, 2025 and sell it today you would earn a total of  3,270  from holding Direxion Daily Technology or generate 34.38% return on investment over 90 days.

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

Direxion Daily Technology  vs.  SPDR Barclays Short

Direxion Daily Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Direxion Daily disclosed solid returns over the last few months and may actually be approaching a breakup point.

SPDR Barclays Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Barclays Short are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SPDR Barclays is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and SPDR Barclays

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

The idea behind Direxion Daily Technology and SPDR Barclays Short 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.