Correlation Between Direxion Monthly and Wilshire Large
Can any of the company-specific risk be diversified away by investing in both Direxion Monthly and Wilshire Large 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 Direxion Monthly and Wilshire Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Direxion Monthly Nasdaq 100 and Wilshire Large, you can compare the effects of market volatilities on Direxion Monthly and Wilshire Large 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 Direxion Monthly with a short position of Wilshire Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Monthly and Wilshire Large.
Diversification Opportunities for Direxion Monthly and Wilshire Large
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Direxion and Wilshire is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Monthly Nasdaq 100 and Wilshire Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilshire Large and Direxion 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 Direxion Monthly Nasdaq 100 are associated (or correlated) with Wilshire Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilshire Large has no effect on the direction of Direxion Monthly i.e., Direxion Monthly and Wilshire Large go up and down completely randomly.
Pair Corralation between Direxion Monthly and Wilshire Large
Assuming the 90 days horizon Direxion Monthly Nasdaq 100 is expected to generate 1.75 times more return on investment than Wilshire Large. However, Direxion Monthly is 1.75 times more volatile than Wilshire Large. It trades about 0.18 of its potential returns per unit of risk. Wilshire Large is currently generating about 0.21 per unit of risk. If you would invest 8,142 in Direxion Monthly Nasdaq 100 on September 12, 2024 and sell it today you would earn a total of 1,653 from holding Direxion Monthly Nasdaq 100 or generate 20.3% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.44% |
Values | Daily Returns |
Direxion Monthly Nasdaq 100 vs. Wilshire Large
Performance |
Timeline |
Direxion Monthly Nasdaq |
Wilshire Large |
Direxion Monthly and Wilshire Large Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Direxion Monthly and Wilshire Large
The main advantage of trading using opposite Direxion Monthly and Wilshire Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Monthly position performs unexpectedly, Wilshire Large 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 Wilshire Large will offset losses from the drop in Wilshire Large's long position.Direxion Monthly vs. Direxion Monthly Sp | Direxion Monthly vs. Direxion Monthly Small | Direxion Monthly vs. Nasdaq 100 2x Strategy | Direxion Monthly vs. Nasdaq 100 2x Strategy |
Wilshire Large vs. Large Pany Value | Wilshire Large vs. Small Pany Growth | Wilshire Large vs. Small Pany Value | Wilshire Large vs. Value Line Premier |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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