Correlation Between Direxion Shares and IShares Trust

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

By analyzing existing cross correlation between Direxion Shares ETF and iShares Trust , you can compare the effects of market volatilities on Direxion Shares and IShares Trust 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 Shares with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Shares and IShares Trust.

Diversification Opportunities for Direxion Shares and IShares Trust

0.92

Correlation Coefficient

Direxion Shares  IShares Trust

Almost no diversification

The 3 months correlation between Direxion and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Shares ETF and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Direxion Shares 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 Shares ETF are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Direxion Shares i.e., Direxion Shares and IShares Trust go up and down completely randomly.

Pair Corralation between Direxion Shares and IShares Trust

Assuming the 90 days trading horizon Direxion Shares ETF is expected to generate 2.15 times more return on investment than IShares Trust. However, Direxion Shares is 2.15 times more volatile than iShares Trust . It trades about 0.24 of its potential returns per unit of risk. iShares Trust is currently generating about 0.13 per unit of risk. If you would invest  55,607  in Direxion Shares ETF on April 25, 2025 and sell it today you would earn a total of  24,038  from holding Direxion Shares ETF or generate 43.23% return on investment over 90 days.

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

Direxion Shares ETF  vs.  iShares Trust

Direxion Shares ETF

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Shares ETF are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Direxion Shares showed solid returns over the last few months and may actually be approaching a breakup point.

iShares Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, IShares Trust may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Direxion Shares and IShares Trust

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

The idea behind Direxion Shares ETF and iShares Trust 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 Transaction History module to view history of all your transactions and understand their impact on performance.