Correlation Between Direxion Daily and IndexIQ
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and IndexIQ 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 IndexIQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily NVDA and IndexIQ, you can compare the effects of market volatilities on Direxion Daily and IndexIQ 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 IndexIQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and IndexIQ.
Diversification Opportunities for Direxion Daily and IndexIQ
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Direxion and IndexIQ is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ 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 NVDA are associated (or correlated) with IndexIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ has no effect on the direction of Direxion Daily i.e., Direxion Daily and IndexIQ go up and down completely randomly.
Pair Corralation between Direxion Daily and IndexIQ
Given the investment horizon of 90 days Direxion Daily NVDA is expected to generate 5.82 times more return on investment than IndexIQ. However, Direxion Daily is 5.82 times more volatile than IndexIQ. It trades about 0.12 of its potential returns per unit of risk. IndexIQ is currently generating about -0.01 per unit of risk. If you would invest 2,498 in Direxion Daily NVDA on September 3, 2024 and sell it today you would earn a total of 9,115 from holding Direxion Daily NVDA or generate 364.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 42.86% |
| Values | Daily Returns |
Direxion Daily NVDA vs. IndexIQ
Performance |
| Timeline |
| Direxion Daily NVDA |
| IndexIQ |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Direxion Daily and IndexIQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and IndexIQ
The main advantage of trading using opposite Direxion Daily and IndexIQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, IndexIQ 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 IndexIQ will offset losses from the drop in IndexIQ's long position.| Direxion Daily vs. ProShares Ultra SP500 | Direxion Daily vs. Direxion Daily SP500 | Direxion Daily vs. ProShares Ultra QQQ | Direxion Daily vs. Direxion Daily SP |
| IndexIQ vs. VanEck Natural Resources | IndexIQ vs. IQ Merger Arbitrage | IndexIQ vs. SPDR SP Global | IndexIQ vs. IQ Hedge Multi Strategy |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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