Correlation Between Direxion Monthly and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both Direxion Monthly and Litman Gregory 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 Litman Gregory into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Monthly Nasdaq 100 and Litman Gregory Masters, you can compare the effects of market volatilities on Direxion Monthly and Litman Gregory 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 Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Monthly and Litman Gregory.
Diversification Opportunities for Direxion Monthly and Litman Gregory
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Direxion and Litman is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Monthly Nasdaq 100 and Litman Gregory Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Masters 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 Nasdaq 100 are associated (or correlated) with Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Masters has no effect on the direction of Direxion Monthly i.e., Direxion Monthly and Litman Gregory go up and down completely randomly.
Pair Corralation between Direxion Monthly and Litman Gregory
Assuming the 90 days horizon Direxion Monthly Nasdaq 100 is expected to under-perform the Litman Gregory. In addition to that, Direxion Monthly is 19.27 times more volatile than Litman Gregory Masters. It trades about -0.04 of its total potential returns per unit of risk. Litman Gregory Masters is currently generating about -0.27 per unit of volatility. If you would invest 987.00 in Litman Gregory Masters on January 13, 2025 and sell it today you would lose (20.00) from holding Litman Gregory Masters or give up 2.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Monthly Nasdaq 100 vs. Litman Gregory Masters
Performance |
| Timeline |
| Direxion Monthly Nasdaq |
| Litman Gregory Masters |
Direxion Monthly and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Monthly and Litman Gregory
The main advantage of trading using opposite Direxion Monthly and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Monthly position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory's long position.| Direxion Monthly vs. Direxion Monthly Sp | Direxion Monthly vs. Direxion Monthly Small | Direxion Monthly vs. Nasdaq 100 2x Strategy | Direxion Monthly vs. Nasdaq 100 2x Strategy |
| Litman Gregory vs. Imgp Sbh Focused | Litman Gregory vs. Litman Gregory Masters | Litman Gregory vs. Litman Gregory Masters | Litman Gregory vs. Litman Gregory Masters |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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