Correlation Between Advent Claymore and Direxion Monthly

Can any of the company-specific risk be diversified away by investing in both Advent Claymore 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 Advent Claymore and Direxion Monthly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Advent Claymore Convertible and Direxion Monthly Nasdaq 100, you can compare the effects of market volatilities on Advent Claymore 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 Advent Claymore with a short position of Direxion Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advent Claymore and Direxion Monthly.

Diversification Opportunities for Advent Claymore and Direxion Monthly

0.6

Correlation Coefficient

Advent Claymore  Direxion Monthly

Poor diversification

The 3 months correlation between Advent and Direxion is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Advent Claymore Convertible 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 Advent Claymore 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 Advent Claymore Convertible 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 Advent Claymore i.e., Advent Claymore and Direxion Monthly go up and down completely randomly.

Pair Corralation between Advent Claymore and Direxion Monthly

Considering the 90-day investment horizon Advent Claymore Convertible is expected to generate 0.4 times more return on investment than Direxion Monthly. However, Advent Claymore Convertible is 2.49 times less risky than Direxion Monthly. It trades about -0.09 of its potential returns per unit of risk. Direxion Monthly Nasdaq 100 is currently generating about -0.12 per unit of risk. If you would invest  1,209  in Advent Claymore Convertible on December 2, 2024 and sell it today you would lose (14.00) from holding Advent Claymore Convertible or give up 1.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Advent Claymore Convertible  vs.  Direxion Monthly Nasdaq 100

Advent Claymore Conv

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advent Claymore Convertible are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent basic indicators, Advent Claymore is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Direxion Monthly Nasdaq

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Monthly Nasdaq 100 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Direxion Monthly is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Advent Claymore and Direxion Monthly

The main advantage of trading using opposite Advent Claymore and Direxion Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advent Claymore 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.

The idea behind Advent Claymore Convertible and Direxion Monthly Nasdaq 100 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.