Correlation Between Nasdaq 100 and Direxion Monthly
Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 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 Nasdaq 100 and Direxion Monthly into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq 100 2x Strategy and Direxion Monthly Small, you can compare the effects of market volatilities on Nasdaq 100 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 Nasdaq 100 with a short position of Direxion Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and Direxion Monthly.
Diversification Opportunities for Nasdaq 100 and Direxion Monthly
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nasdaq and Direxion is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Direxion Monthly Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Monthly Small and Nasdaq 100 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 Nasdaq 100 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 Small has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and Direxion Monthly go up and down completely randomly.
Pair Corralation between Nasdaq 100 and Direxion Monthly
Assuming the 90 days horizon Nasdaq 100 is expected to generate 1.09 times less return on investment than Direxion Monthly. In addition to that, Nasdaq 100 is 1.01 times more volatile than Direxion Monthly Small. It trades about 0.08 of its total potential returns per unit of risk. Direxion Monthly Small is currently generating about 0.08 per unit of volatility. If you would invest 7,165 in Direxion Monthly Small on August 28, 2024 and sell it today you would earn a total of 2,948 from holding Direxion Monthly Small or generate 41.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.52% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Direxion Monthly Small
Performance |
| Timeline |
| Nasdaq 100 2x |
| Direxion Monthly Small |
Nasdaq 100 and Direxion Monthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq 100 and Direxion Monthly
The main advantage of trading using opposite Nasdaq 100 and Direxion Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 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.| Nasdaq 100 vs. Direxion Monthly Nasdaq 100 | Nasdaq 100 vs. Ultranasdaq 100 Profund Ultranasdaq 100 | Nasdaq 100 vs. Dow 2x Strategy |
| Direxion Monthly vs. Direxion Monthly High | Direxion Monthly vs. Direxion Monthly Nasdaq 100 | Direxion Monthly vs. Direxion Monthly Sp | Direxion Monthly vs. Franklin Emerging Market |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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