Correlation Between Direxion Daily and TQM PORATION

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Can any of the company-specific risk be diversified away by investing in both Direxion Daily and TQM PORATION 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 TQM PORATION 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 TQM PORATION, you can compare the effects of market volatilities on Direxion Daily and TQM PORATION 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 TQM PORATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and TQM PORATION.

Diversification Opportunities for Direxion Daily and TQM PORATION

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Direxion and TQM is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP500 and TQM PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TQM PORATION 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 TQM PORATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TQM PORATION has no effect on the direction of Direxion Daily i.e., Direxion Daily and TQM PORATION go up and down completely randomly.

Pair Corralation between Direxion Daily and TQM PORATION

Given the investment horizon of 90 days Direxion Daily SP500 is expected to generate 3.5 times more return on investment than TQM PORATION. However, Direxion Daily is 3.5 times more volatile than TQM PORATION. It trades about 0.2 of its potential returns per unit of risk. TQM PORATION is currently generating about 0.21 per unit of risk. If you would invest  11,303  in Direxion Daily SP500 on December 29, 2023 and sell it today you would earn a total of  2,105  from holding Direxion Daily SP500 or generate 18.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Direxion Daily SP500  vs.  TQM PORATION

 Performance 
       Timeline  
Direxion Daily SP500 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Direxion Daily disclosed solid returns over the last few months and may actually be approaching a breakup point.
TQM PORATION 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days TQM PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Direxion Daily and TQM PORATION Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Direxion Daily and TQM PORATION

The main advantage of trading using opposite Direxion Daily and TQM PORATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, TQM PORATION 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 TQM PORATION will offset losses from the drop in TQM PORATION's long position.
The idea behind Direxion Daily SP500 and TQM PORATION 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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