Correlation Between Direxion Daily and Defiance Nasdaq
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and Defiance 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 Direxion Daily and Defiance Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily MSCI and Defiance Nasdaq 100, you can compare the effects of market volatilities on Direxion Daily and Defiance 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 Direxion Daily with a short position of Defiance Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Defiance Nasdaq.
Diversification Opportunities for Direxion Daily and Defiance Nasdaq
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and Defiance is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily MSCI and Defiance Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance Nasdaq 100 and Direxion Daily 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 Daily MSCI are associated (or correlated) with Defiance Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance Nasdaq 100 has no effect on the direction of Direxion Daily i.e., Direxion Daily and Defiance Nasdaq go up and down completely randomly.
Pair Corralation between Direxion Daily and Defiance Nasdaq
Given the investment horizon of 90 days Direxion Daily MSCI is expected to under-perform the Defiance Nasdaq. In addition to that, Direxion Daily is 5.78 times more volatile than Defiance Nasdaq 100. It trades about -0.1 of its total potential returns per unit of risk. Defiance Nasdaq 100 is currently generating about 0.24 per unit of volatility. If you would invest 3,214 in Defiance Nasdaq 100 on September 4, 2024 and sell it today you would earn a total of 115.00 from holding Defiance Nasdaq 100 or generate 3.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Direxion Daily MSCI vs. Defiance Nasdaq 100
Performance |
| Timeline |
| Direxion Daily MSCI |
| Defiance Nasdaq 100 |
Direxion Daily and Defiance Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and Defiance Nasdaq
The main advantage of trading using opposite Direxion Daily and Defiance Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, Defiance 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 Defiance Nasdaq will offset losses from the drop in Defiance Nasdaq's long position.| Direxion Daily vs. ProShares Ultra SP500 | Direxion Daily vs. ProShares Ultra QQQ | Direxion Daily vs. MicroSectors FANG Index | Direxion Daily vs. ProShares Ultra Financials |
| Defiance Nasdaq vs. First Trust Dorsey | Defiance Nasdaq vs. Direxion Daily MSCI | Defiance Nasdaq vs. MFUT | Defiance Nasdaq vs. VanEck Morningstar Wide |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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