Correlation Between First Trust and Direxion Daily
Can any of the company-specific risk be diversified away by investing in both First Trust and Direxion Daily 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 First Trust and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Dorsey and Direxion Daily NVDA, you can compare the effects of market volatilities on First Trust and Direxion Daily 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 First Trust with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Direxion Daily.
Diversification Opportunities for First Trust and Direxion Daily
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Direxion is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Dorsey and Direxion Daily NVDA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily NVDA and First Trust 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 First Trust Dorsey are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily NVDA has no effect on the direction of First Trust i.e., First Trust and Direxion Daily go up and down completely randomly.
Pair Corralation between First Trust and Direxion Daily
Allowing for the 90-day total investment horizon First Trust is expected to generate 2.3 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, First Trust Dorsey is 14.78 times less risky than Direxion Daily. It trades about 0.17 of its potential returns per unit of risk. Direxion Daily NVDA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 9,683 in Direxion Daily NVDA on November 18, 2024 and sell it today you would lose (551.00) from holding Direxion Daily NVDA or give up 5.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Dorsey vs. Direxion Daily NVDA
Performance |
| Timeline |
| First Trust Dorsey |
| Direxion Daily NVDA |
First Trust and Direxion Daily Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Direxion Daily
The main advantage of trading using opposite First Trust and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Direxion Daily 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 Direxion Daily will offset losses from the drop in Direxion Daily's long position.| First Trust vs. First Trust Dorsey | First Trust vs. Invesco DWA Momentum | First Trust vs. First Trust Capital | First Trust vs. First Trust Large |
| Direxion Daily vs. Tidal Trust II | Direxion Daily vs. Tidal Trust II | Direxion Daily vs. Direxion Daily META | Direxion Daily vs. Direxion Daily META |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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