Correlation Between First Trust and Direxion Work

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

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

Diversification Opportunities for First Trust and Direxion Work

0.93

Correlation Coefficient

First Trust  Direxion Work

Almost no diversification

The 3 months correlation between First and Direxion is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ and Direxion Work From in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Work From and First 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 First Trust NASDAQ are associated (or correlated) with Direxion Work. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Work From has no effect on the direction of First Trust i.e., First Trust and Direxion Work go up and down completely randomly.

Pair Corralation between First Trust and Direxion Work

Given the investment horizon of 90 days First Trust is expected to generate 1.53 times less return on investment than Direxion Work. But when comparing it to its historical volatility, First Trust NASDAQ is 1.01 times less risky than Direxion Work. It trades about 0.11 of its potential returns per unit of risk. Direxion Work From is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5,975  in Direxion Work From on October 25, 2024 and sell it today you would earn a total of  816.00  from holding Direxion Work From or generate 13.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

First Trust NASDAQ  vs.  Direxion Work From

First Trust NASDAQ

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust NASDAQ are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental drivers, First Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Direxion Work From

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Work From are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Direxion Work demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Direxion Work

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

The idea behind First Trust NASDAQ and Direxion Work From 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.