Correlation Between Direxion Monthly and Arrow Managed
Can any of the company-specific risk be diversified away by investing in both Direxion Monthly and Arrow Managed 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 Arrow Managed 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 Arrow Managed Futures, you can compare the effects of market volatilities on Direxion Monthly and Arrow Managed 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 Arrow Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Monthly and Arrow Managed.
Diversification Opportunities for Direxion Monthly and Arrow Managed
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and Arrow is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Monthly Nasdaq 100 and Arrow Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Managed Futures 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 Arrow Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Managed Futures has no effect on the direction of Direxion Monthly i.e., Direxion Monthly and Arrow Managed go up and down completely randomly.
Pair Corralation between Direxion Monthly and Arrow Managed
Assuming the 90 days horizon Direxion Monthly Nasdaq 100 is expected to generate 1.26 times more return on investment than Arrow Managed. However, Direxion Monthly is 1.26 times more volatile than Arrow Managed Futures. It trades about 0.1 of its potential returns per unit of risk. Arrow Managed Futures is currently generating about 0.01 per unit of risk. If you would invest 3,812 in Direxion Monthly Nasdaq 100 on October 20, 2024 and sell it today you would earn a total of 5,598 from holding Direxion Monthly Nasdaq 100 or generate 146.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Monthly Nasdaq 100 vs. Arrow Managed Futures
Performance |
| Timeline |
| Direxion Monthly Nasdaq |
| Arrow Managed Futures |
Direxion Monthly and Arrow Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Monthly and Arrow Managed
The main advantage of trading using opposite Direxion Monthly and Arrow Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Monthly position performs unexpectedly, Arrow Managed 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 Arrow Managed will offset losses from the drop in Arrow Managed'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 |
| Arrow Managed vs. Short Term Bond Fund | Arrow Managed vs. Transam Short Term Bond | Arrow Managed vs. Lord Abbett Short | Arrow Managed vs. Touchstone Ultra Short |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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