Correlation Between Direxion Monthly and Paradigm Micro-cap
Can any of the company-specific risk be diversified away by investing in both Direxion Monthly and Paradigm Micro-cap 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 Paradigm Micro-cap 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 Paradigm Micro Cap Fund, you can compare the effects of market volatilities on Direxion Monthly and Paradigm Micro-cap 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 Paradigm Micro-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Monthly and Paradigm Micro-cap.
Diversification Opportunities for Direxion Monthly and Paradigm Micro-cap
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Direxion and Paradigm is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Monthly Nasdaq 100 and Paradigm Micro Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Micro Cap 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 Paradigm Micro-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Micro Cap has no effect on the direction of Direxion Monthly i.e., Direxion Monthly and Paradigm Micro-cap go up and down completely randomly.
Pair Corralation between Direxion Monthly and Paradigm Micro-cap
Assuming the 90 days horizon Direxion Monthly Nasdaq 100 is expected to generate 1.35 times more return on investment than Paradigm Micro-cap. However, Direxion Monthly is 1.35 times more volatile than Paradigm Micro Cap Fund. It trades about 0.1 of its potential returns per unit of risk. Paradigm Micro Cap Fund is currently generating about 0.07 per unit of risk. If you would invest 5,975 in Direxion Monthly Nasdaq 100 on August 29, 2024 and sell it today you would earn a total of 3,060 from holding Direxion Monthly Nasdaq 100 or generate 51.21% 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. Paradigm Micro Cap Fund
Performance |
| Timeline |
| Direxion Monthly Nasdaq |
| Paradigm Micro Cap |
Direxion Monthly and Paradigm Micro-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Monthly and Paradigm Micro-cap
The main advantage of trading using opposite Direxion Monthly and Paradigm Micro-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Monthly position performs unexpectedly, Paradigm Micro-cap 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 Paradigm Micro-cap will offset losses from the drop in Paradigm Micro-cap'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 |
| Paradigm Micro-cap vs. Vanguard Small Cap Index | Paradigm Micro-cap vs. T Rowe Price | Paradigm Micro-cap vs. HUMANA INC | Paradigm Micro-cap vs. Aquagold International |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |