Correlation Between Direxion NASDAQ and Vanguard
Can any of the company-specific risk be diversified away by investing in both Direxion NASDAQ and Vanguard 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 NASDAQ and Vanguard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion NASDAQ 100 Equal and Vanguard SP Mid Cap, you can compare the effects of market volatilities on Direxion NASDAQ and Vanguard 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 NASDAQ with a short position of Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion NASDAQ and Vanguard.
Diversification Opportunities for Direxion NASDAQ and Vanguard
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Direxion and Vanguard is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Direxion NASDAQ 100 Equal and Vanguard SP Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP Mid and Direxion NASDAQ 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 NASDAQ 100 Equal are associated (or correlated) with Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP Mid has no effect on the direction of Direxion NASDAQ i.e., Direxion NASDAQ and Vanguard go up and down completely randomly.
Pair Corralation between Direxion NASDAQ and Vanguard
Given the investment horizon of 90 days Direxion NASDAQ is expected to generate 2.51 times less return on investment than Vanguard. But when comparing it to its historical volatility, Direxion NASDAQ 100 Equal is 1.18 times less risky than Vanguard. It trades about 0.12 of its potential returns per unit of risk. Vanguard SP Mid Cap is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 10,636 in Vanguard SP Mid Cap on August 30, 2024 and sell it today you would earn a total of 762.00 from holding Vanguard SP Mid Cap or generate 7.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Direxion NASDAQ 100 Equal vs. Vanguard SP Mid Cap
Performance |
| Timeline |
| Direxion NASDAQ 100 |
| Vanguard SP Mid |
Direxion NASDAQ and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion NASDAQ and Vanguard
The main advantage of trading using opposite Direxion NASDAQ and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion NASDAQ position performs unexpectedly, Vanguard 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 Vanguard will offset losses from the drop in Vanguard's long position.| 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 |
| Vanguard vs. Vanguard SP Small Cap | Vanguard vs. Vanguard SP Mid Cap | Vanguard vs. Vanguard SP Mid Cap | Vanguard vs. Vanguard SP Small Cap |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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