Correlation Between Nasdaq-100(r) and Direxion Monthly
Can any of the company-specific risk be diversified away by investing in both Nasdaq-100(r) 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(r) 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 Sp, you can compare the effects of market volatilities on Nasdaq-100(r) 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(r) with a short position of Direxion Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq-100(r) and Direxion Monthly.
Diversification Opportunities for Nasdaq-100(r) and Direxion Monthly
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Nasdaq-100(r) and Direxion is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 2x Strategy and Direxion Monthly Sp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Monthly and Nasdaq-100(r) 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 has no effect on the direction of Nasdaq-100(r) i.e., Nasdaq-100(r) and Direxion Monthly go up and down completely randomly.
Pair Corralation between Nasdaq-100(r) and Direxion Monthly
Assuming the 90 days horizon Nasdaq-100(r) is expected to generate 1.03 times less return on investment than Direxion Monthly. In addition to that, Nasdaq-100(r) is 1.57 times more volatile than Direxion Monthly Sp. It trades about 0.2 of its total potential returns per unit of risk. Direxion Monthly Sp is currently generating about 0.33 per unit of volatility. If you would invest 7,017 in Direxion Monthly Sp on September 2, 2024 and sell it today you would earn a total of 635.00 from holding Direxion Monthly Sp or generate 9.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq 100 2x Strategy vs. Direxion Monthly Sp
Performance |
| Timeline |
| Nasdaq 100 2x |
| Direxion Monthly |
Nasdaq-100(r) and Direxion Monthly Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq-100(r) and Direxion Monthly
The main advantage of trading using opposite Nasdaq-100(r) and Direxion Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq-100(r) 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(r) vs. Sp 500 2x | Nasdaq-100(r) vs. Inverse Nasdaq 100 2x | Nasdaq-100(r) vs. Inverse Sp 500 | Nasdaq-100(r) vs. Ultra Nasdaq 100 Profunds |
| Direxion Monthly vs. Direxion Monthly Small | Direxion Monthly vs. Nasdaq 100 2x Strategy | Direxion Monthly vs. Nasdaq 100 2x Strategy | Direxion Monthly vs. Ultra Nasdaq 100 Profunds |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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