Correlation Between Small Company and Direxion Monthly
Can any of the company-specific risk be diversified away by investing in both Small Company 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 Small Company and Direxion Monthly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Pany Growth and Direxion Monthly High, you can compare the effects of market volatilities on Small Company 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 Small Company with a short position of Direxion Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Company and Direxion Monthly.
Diversification Opportunities for Small Company and Direxion Monthly
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and Direxion is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Direxion Monthly High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Monthly High and Small Company 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 Small Pany Growth 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 High has no effect on the direction of Small Company i.e., Small Company and Direxion Monthly go up and down completely randomly.
Pair Corralation between Small Company and Direxion Monthly
Assuming the 90 days horizon Small Pany Growth is expected to generate 6.03 times more return on investment than Direxion Monthly. However, Small Company is 6.03 times more volatile than Direxion Monthly High. It trades about 0.09 of its potential returns per unit of risk. Direxion Monthly High is currently generating about 0.12 per unit of risk. If you would invest 1,111 in Small Pany Growth on September 5, 2024 and sell it today you would earn a total of 536.00 from holding Small Pany Growth or generate 48.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Small Pany Growth vs. Direxion Monthly High
Performance |
| Timeline |
| Small Pany Growth |
| Direxion Monthly High |
Small Company and Direxion Monthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Company and Direxion Monthly
The main advantage of trading using opposite Small Company and Direxion Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Company 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.| Small Company vs. Mid Cap Growth | Small Company vs. Growth Portfolio Class | Small Company vs. Morgan Stanley Multi | Small Company vs. Emerging Markets Portfolio |
| Direxion Monthly vs. Direxion Hilton Tactical | Direxion Monthly vs. Direxion Hilton Tactical | Direxion Monthly vs. Direxion Monthly Nasdaq 100 | Direxion Monthly vs. Direxion Monthly Nasdaq 100 |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |