Correlation Between Direxion Daily and NEOS Nasdaq
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and NEOS Nasdaq 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 NEOS Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily Regional and NEOS Nasdaq 100, you can compare the effects of market volatilities on Direxion Daily and NEOS Nasdaq 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 NEOS Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and NEOS Nasdaq.
Diversification Opportunities for Direxion Daily and NEOS Nasdaq
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direxion and NEOS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Regional and NEOS Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEOS Nasdaq 100 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 Regional are associated (or correlated) with NEOS Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEOS Nasdaq 100 has no effect on the direction of Direxion Daily i.e., Direxion Daily and NEOS Nasdaq go up and down completely randomly.
Pair Corralation between Direxion Daily and NEOS Nasdaq
Given the investment horizon of 90 days Direxion Daily Regional is expected to generate 15.05 times more return on investment than NEOS Nasdaq. However, Direxion Daily is 15.05 times more volatile than NEOS Nasdaq 100. It trades about 0.24 of its potential returns per unit of risk. NEOS Nasdaq 100 is currently generating about 0.32 per unit of risk. If you would invest 10,482 in Direxion Daily Regional on September 3, 2024 and sell it today you would earn a total of 5,162 from holding Direxion Daily Regional or generate 49.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily Regional vs. NEOS Nasdaq 100
Performance |
| Timeline |
| Direxion Daily Regional |
| NEOS Nasdaq 100 |
Direxion Daily and NEOS Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and NEOS Nasdaq
The main advantage of trading using opposite Direxion Daily and NEOS Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, NEOS Nasdaq 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 NEOS Nasdaq will offset losses from the drop in NEOS Nasdaq's long position.| Direxion Daily vs. ProShares Ultra SP500 | Direxion Daily vs. Direxion Daily SP500 | Direxion Daily vs. ProShares Ultra QQQ | Direxion Daily vs. Direxion Daily SP |
| NEOS Nasdaq vs. Global X SP | NEOS Nasdaq vs. Global X NASDAQ | NEOS Nasdaq vs. NEOS ETF Trust | NEOS Nasdaq vs. JPMorgan Equity Premium |
Check out your portfolio center.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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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