Correlation Between Boston Trust and Direxion Hilton

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

By analyzing existing cross correlation between Boston Trust Midcap and Direxion Hilton Tactical, you can compare the effects of market volatilities on Boston Trust and Direxion Hilton 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 Boston Trust with a short position of Direxion Hilton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Trust and Direxion Hilton.

Diversification Opportunities for Boston Trust and Direxion Hilton

0.72

Correlation Coefficient

Boston Trust  Direxion Hilton

Poor diversification

The 3 months correlation between Boston and Direxion is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Boston Trust Midcap and Direxion Hilton Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Hilton Tactical and Boston Trust 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 Boston Trust Midcap are associated (or correlated) with Direxion Hilton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Hilton Tactical has no effect on the direction of Boston Trust i.e., Boston Trust and Direxion Hilton go up and down completely randomly.

Pair Corralation between Boston Trust and Direxion Hilton

Assuming the 90 days horizon Boston Trust Midcap is expected to under-perform the Direxion Hilton. In addition to that, Boston Trust is 2.81 times more volatile than Direxion Hilton Tactical. It trades about -0.34 of its total potential returns per unit of risk. Direxion Hilton Tactical is currently generating about -0.1 per unit of volatility. If you would invest  1,835  in Direxion Hilton Tactical on September 28, 2024 and sell it today you would lose (16.00) from holding Direxion Hilton Tactical or give up 0.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Boston Trust Midcap  vs.  Direxion Hilton Tactical

Boston Trust Midcap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Trust Midcap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Boston Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Direxion Hilton Tactical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Boston Trust and Direxion Hilton

The main advantage of trading using opposite Boston Trust and Direxion Hilton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Trust position performs unexpectedly, Direxion Hilton 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 Hilton will offset losses from the drop in Direxion Hilton's long position.

The idea behind Boston Trust Midcap and Direxion Hilton Tactical 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..