Correlation Between Direxion Monthly and Nasdaq-100(r)
Can any of the company-specific risk be diversified away by investing in both Direxion Monthly and Nasdaq-100(r) 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 Nasdaq-100(r) 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 Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Direxion Monthly and Nasdaq-100(r) 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 Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Monthly and Nasdaq-100(r).
Diversification Opportunities for Direxion Monthly and Nasdaq-100(r)
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Direxion and Nasdaq-100(r) is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Monthly Nasdaq 100 and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x 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 Nasdaq-100(r). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 2x has no effect on the direction of Direxion Monthly i.e., Direxion Monthly and Nasdaq-100(r) go up and down completely randomly.
Pair Corralation between Direxion Monthly and Nasdaq-100(r)
Assuming the 90 days horizon Direxion Monthly is expected to generate 1.11 times less return on investment than Nasdaq-100(r). But when comparing it to its historical volatility, Direxion Monthly Nasdaq 100 is 1.15 times less risky than Nasdaq-100(r). It trades about 0.1 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 15,539 in Nasdaq 100 2x Strategy on August 30, 2024 and sell it today you would earn a total of 25,485 from holding Nasdaq 100 2x Strategy or generate 164.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Monthly Nasdaq 100 vs. Nasdaq 100 2x Strategy
Performance |
| Timeline |
| Direxion Monthly Nasdaq |
| Nasdaq 100 2x |
Direxion Monthly and Nasdaq-100(r) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Monthly and Nasdaq-100(r)
The main advantage of trading using opposite Direxion Monthly and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Monthly position performs unexpectedly, Nasdaq-100(r) 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 Nasdaq-100(r) will offset losses from the drop in Nasdaq-100(r)'s long position.| Direxion Monthly vs. Direxion Monthly Small | Direxion Monthly vs. Nasdaq 100 2x Strategy | Direxion Monthly vs. Nasdaq 100 2x Strategy | Direxion Monthly vs. Ultra Nasdaq 100 Profunds |
| Nasdaq-100(r) vs. John Hancock Government | Nasdaq-100(r) vs. Blackrock Government Bond | Nasdaq-100(r) vs. Dunham Porategovernment Bond | Nasdaq-100(r) vs. Us Government Plus |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |