Correlation Between Dow 2x and Direxion Monthly
Can any of the company-specific risk be diversified away by investing in both Dow 2x 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 Dow 2x and Direxion Monthly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow 2x Strategy and Direxion Monthly Nasdaq 100, you can compare the effects of market volatilities on Dow 2x 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 Dow 2x with a short position of Direxion Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow 2x and Direxion Monthly.
Diversification Opportunities for Dow 2x and Direxion Monthly
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and DIREXION is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dow 2x Strategy and Direxion Monthly Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Monthly Nasdaq and Dow 2x 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 Dow 2x Strategy 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 Nasdaq has no effect on the direction of Dow 2x i.e., Dow 2x and Direxion Monthly go up and down completely randomly.
Pair Corralation between Dow 2x and Direxion Monthly
Assuming the 90 days horizon Dow 2x Strategy is expected to generate 0.83 times more return on investment than Direxion Monthly. However, Dow 2x Strategy is 1.2 times less risky than Direxion Monthly. It trades about 0.18 of its potential returns per unit of risk. Direxion Monthly Nasdaq 100 is currently generating about 0.14 per unit of risk. If you would invest 16,394 in Dow 2x Strategy on August 31, 2024 and sell it today you would earn a total of 2,901 from holding Dow 2x Strategy or generate 17.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow 2x Strategy vs. Direxion Monthly Nasdaq 100
Performance |
| Timeline |
| Dow 2x Strategy |
| Direxion Monthly Nasdaq |
Dow 2x and Direxion Monthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow 2x and Direxion Monthly
The main advantage of trading using opposite Dow 2x and Direxion Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 2x 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.| Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Nasdaq 100 2x Strategy | Dow 2x vs. Ultramid Cap Profund Ultramid Cap |
| Direxion Monthly vs. Direxion Monthly Sp | Direxion Monthly vs. Direxion Monthly Small | Direxion Monthly vs. Nasdaq 100 2x Strategy | Direxion Monthly vs. Nasdaq 100 2x 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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