Correlation Between Direxion Monthly and Small Company
Can any of the company-specific risk be diversified away by investing in both Direxion Monthly and Small Company 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 Monthly and Small Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Monthly High and Small Pany Growth, you can compare the effects of market volatilities on Direxion Monthly and Small Company 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 Monthly with a short position of Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Monthly and Small Company.
Diversification Opportunities for Direxion Monthly and Small Company
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Direxion and Small is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Monthly High and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and Direxion Monthly 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 Monthly High are associated (or correlated) with Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Direxion Monthly i.e., Direxion Monthly and Small Company go up and down completely randomly.
Pair Corralation between Direxion Monthly and Small Company
Assuming the 90 days horizon Direxion Monthly is expected to generate 4.63 times less return on investment than Small Company. But when comparing it to its historical volatility, Direxion Monthly High is 6.02 times less risky than Small Company. It trades about 0.12 of its potential returns per unit of risk. Small Pany Growth is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,111 in Small Pany Growth on September 4, 2024 and sell it today you would earn a total of 558.00 from holding Small Pany Growth or generate 50.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Monthly High vs. Small Pany Growth
Performance |
| Timeline |
| Direxion Monthly High |
| Small Pany Growth |
Direxion Monthly and Small Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Monthly and Small Company
The main advantage of trading using opposite Direxion Monthly and Small Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Monthly position performs unexpectedly, Small Company 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 Small Company will offset losses from the drop in Small Company's long position.| Direxion Monthly vs. Small Pany Growth | Direxion Monthly vs. Champlain Mid Cap | Direxion Monthly vs. Smallcap Growth Fund | Direxion Monthly vs. T Rowe Price |
| Small Company vs. Mid Cap Growth | Small Company vs. Growth Portfolio Class | Small Company vs. Morgan Stanley Multi | Small Company vs. Emerging Markets Portfolio |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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