Correlation Between Direxion Daily and NKEQ
Can any of the company-specific risk be diversified away by investing in both Direxion Daily and NKEQ 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 NKEQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Daily SP and NKEQ, you can compare the effects of market volatilities on Direxion Daily and NKEQ 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 NKEQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and NKEQ.
Diversification Opportunities for Direxion Daily and NKEQ
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Direxion and NKEQ is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily SP and NKEQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NKEQ 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 SP are associated (or correlated) with NKEQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NKEQ has no effect on the direction of Direxion Daily i.e., Direxion Daily and NKEQ go up and down completely randomly.
Pair Corralation between Direxion Daily and NKEQ
Given the investment horizon of 90 days Direxion Daily SP is expected to under-perform the NKEQ. In addition to that, Direxion Daily is 3.92 times more volatile than NKEQ. It trades about -0.09 of its total potential returns per unit of risk. NKEQ is currently generating about 0.0 per unit of volatility. If you would invest 2,895 in NKEQ on September 12, 2024 and sell it today you would earn a total of 0.00 from holding NKEQ or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 1.88% |
| Values | Daily Returns |
Direxion Daily SP vs. NKEQ
Performance |
| Timeline |
| Direxion Daily SP |
| NKEQ |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Direxion Daily and NKEQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Direxion Daily and NKEQ
The main advantage of trading using opposite Direxion Daily and NKEQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Daily position performs unexpectedly, NKEQ 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 NKEQ will offset losses from the drop in NKEQ's long position.| Direxion Daily vs. Direxion Daily SP500 | Direxion Daily vs. Direxion Daily Small | Direxion Daily vs. ProShares UltraPro Short | Direxion Daily vs. ProShares UltraPro Short |
| NKEQ vs. ProShares UltraShort MSCI | NKEQ vs. ProShares UltraShort MSCI | NKEQ vs. ProShares UltraShort Euro | NKEQ vs. ProShares UltraShort MSCI |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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