Correlation Between Direxion Daily and TQM PORATION

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 Small 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

0.37

Correlation Coefficient

Direxion Daily  TQM PORATION

Weak diversification

The 3 months correlation between Direxion and TQM is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Small 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 Small 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

Considering the 90-day investment horizon Direxion Daily Small is expected to under-perform the TQM PORATION. In addition to that, Direxion Daily is 12.13 times more volatile than TQM PORATION. It trades about -0.17 of its total potential returns per unit of risk. TQM PORATION is currently generating about -0.23 per unit of volatility. If you would invest  2,583  in TQM PORATION on January 19, 2024 and sell it today you would lose (33.00) from holding TQM PORATION or give up 1.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	82.61%
Values	Daily Returns

Direxion Daily Small  vs.  TQM PORATION

Direxion Daily Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily Small has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Direxion Daily is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

TQM PORATION

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TQM PORATION are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TQM PORATION is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 Small 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.