Correlation Between IShares SP and Direxion NASDAQ
Can any of the company-specific risk be diversified away by investing in both IShares SP and Direxion NASDAQ 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 IShares SP and Direxion NASDAQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares SP 500 and Direxion NASDAQ 100 Equal, you can compare the effects of market volatilities on IShares SP and Direxion NASDAQ 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 IShares SP with a short position of Direxion NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Direxion NASDAQ.
Diversification Opportunities for IShares SP and Direxion NASDAQ
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Direxion is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Direxion NASDAQ 100 Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion NASDAQ 100 and IShares SP 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 iShares SP 500 are associated (or correlated) with Direxion NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion NASDAQ 100 has no effect on the direction of IShares SP i.e., IShares SP and Direxion NASDAQ go up and down completely randomly.
Pair Corralation between IShares SP and Direxion NASDAQ
Considering the 90-day investment horizon IShares SP is expected to generate 2.12 times less return on investment than Direxion NASDAQ. In addition to that, IShares SP is 1.03 times more volatile than Direxion NASDAQ 100 Equal. It trades about 0.09 of its total potential returns per unit of risk. Direxion NASDAQ 100 Equal is currently generating about 0.2 per unit of volatility. If you would invest 9,101 in Direxion NASDAQ 100 Equal on August 28, 2024 and sell it today you would earn a total of 401.00 from holding Direxion NASDAQ 100 Equal or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
iShares SP 500 vs. Direxion NASDAQ 100 Equal
Performance |
| Timeline |
| iShares SP 500 |
| Direxion NASDAQ 100 |
IShares SP and Direxion NASDAQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and Direxion NASDAQ
The main advantage of trading using opposite IShares SP and Direxion NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, Direxion NASDAQ 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 NASDAQ will offset losses from the drop in Direxion NASDAQ's long position.| IShares SP vs. Invesco Dynamic Large | IShares SP vs. Perella Weinberg Partners | IShares SP vs. HUMANA INC | IShares SP vs. Aquagold International |
| Direxion NASDAQ vs. First Trust NASDAQ 100 | Direxion NASDAQ vs. First Trust NASDAQ 100 | Direxion NASDAQ vs. Invesco SP 500 | Direxion NASDAQ vs. Invesco SP 500 |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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