Correlation Between GM and Direxion Monthly
Can any of the company-specific risk be diversified away by investing in both GM and Direxion Monthly 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 GM and Direxion Monthly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Direxion Monthly Sp, you can compare the effects of market volatilities on GM and Direxion Monthly 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 GM with a short position of Direxion Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Direxion Monthly.
Diversification Opportunities for GM and Direxion Monthly
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Direxion is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Direxion Monthly Sp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Monthly and GM 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 General Motors are associated (or correlated) with Direxion Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Monthly has no effect on the direction of GM i.e., GM and Direxion Monthly go up and down completely randomly.
Pair Corralation between GM and Direxion Monthly
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.91 times more return on investment than Direxion Monthly. However, GM is 1.91 times more volatile than Direxion Monthly Sp. It trades about 0.12 of its potential returns per unit of risk. Direxion Monthly Sp is currently generating about 0.16 per unit of risk. If you would invest 5,197 in General Motors on August 31, 2024 and sell it today you would earn a total of 353.00 from holding General Motors or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Direxion Monthly Sp
Performance |
| Timeline |
| General Motors |
| Direxion Monthly |
GM and Direxion Monthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Direxion Monthly
The main advantage of trading using opposite GM and Direxion Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Direxion Monthly 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 Monthly will offset losses from the drop in Direxion Monthly's long position.The idea behind General Motors and Direxion Monthly Sp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Direxion Monthly vs. Oppenheimer Gold Special | Direxion Monthly vs. International Investors Gold | Direxion Monthly vs. Gold And Precious | Direxion Monthly vs. Sprott Gold Equity |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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