Correlation Between Dunham Monthly and Direxion Monthly

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

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

Diversification Opportunities for Dunham Monthly and Direxion Monthly

0.48

Correlation Coefficient

Dunham Monthly  Direxion Monthly

Very weak diversification

The 3 months correlation between Dunham and Direxion is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Dunham Monthly Distribution 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 Dunham Monthly 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 Dunham Monthly Distribution 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 Dunham Monthly i.e., Dunham Monthly and Direxion Monthly go up and down completely randomly.

Pair Corralation between Dunham Monthly and Direxion Monthly

Assuming the 90 days horizon Dunham Monthly Distribution is expected to under-perform the Direxion Monthly. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dunham Monthly Distribution is 8.0 times less risky than Direxion Monthly. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Direxion Monthly Nasdaq 100 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9,169  in Direxion Monthly Nasdaq 100 on September 30, 2024 and sell it today you would earn a total of  385.00  from holding Direxion Monthly Nasdaq 100 or generate 4.2% return on investment over 90 days.

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

Dunham Monthly Distribution  vs.  Direxion Monthly Nasdaq 100

Dunham Monthly Distr

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dunham Monthly Distribution are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Dunham Monthly is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Direxion Monthly Nasdaq

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Monthly Nasdaq 100 are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Direxion Monthly may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dunham Monthly and Direxion Monthly

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

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.