Correlation Between Champlain Mid and Direxion Monthly

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

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

Diversification Opportunities for Champlain Mid and Direxion Monthly

0.75

Correlation Coefficient

Champlain Mid  Direxion Monthly

Poor diversification

The 3 months correlation between Champlain and Direxion is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Mid Cap and Direxion Monthly High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Monthly High and Champlain Mid 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 Champlain Mid Cap 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 High has no effect on the direction of Champlain Mid i.e., Champlain Mid and Direxion Monthly go up and down completely randomly.

Pair Corralation between Champlain Mid and Direxion Monthly

Assuming the 90 days horizon Champlain Mid Cap is expected to generate 3.44 times more return on investment than Direxion Monthly. However, Champlain Mid is 3.44 times more volatile than Direxion Monthly High. It trades about 0.19 of its potential returns per unit of risk. Direxion Monthly High is currently generating about 0.11 per unit of risk. If you would invest  2,362  in Champlain Mid Cap on September 12, 2024 and sell it today you would earn a total of  243.00  from holding Champlain Mid Cap or generate 10.29% return on investment over 90 days.

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

Champlain Mid Cap  vs.  Direxion Monthly High

Champlain Mid Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Mid Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Champlain Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Direxion Monthly High

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Monthly High are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Champlain Mid and Direxion Monthly

The main advantage of trading using opposite Champlain Mid and Direxion Monthly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champlain Mid 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 Champlain Mid Cap and Direxion Monthly High 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.