Correlation Between Direxion Monthly and Sit Mid

Can any of the company-specific risk be diversified away by investing in both Direxion Monthly and Sit Mid 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 Sit Mid 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 Sit Mid Cap, you can compare the effects of market volatilities on Direxion Monthly and Sit Mid 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 Sit Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Monthly and Sit Mid.

Diversification Opportunities for Direxion Monthly and Sit Mid

0.62

Correlation Coefficient

Direxion Monthly  Sit Mid

Poor diversification

The 3 months correlation between Direxion and Sit is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Monthly Nasdaq 100 and Sit Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Mid Cap 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 Sit Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Mid Cap has no effect on the direction of Direxion Monthly i.e., Direxion Monthly and Sit Mid go up and down completely randomly.

Pair Corralation between Direxion Monthly and Sit Mid

Assuming the 90 days horizon Direxion Monthly Nasdaq 100 is expected to generate 1.66 times more return on investment than Sit Mid. However, Direxion Monthly is 1.66 times more volatile than Sit Mid Cap. It trades about 0.07 of its potential returns per unit of risk. Sit Mid Cap is currently generating about 0.04 per unit of risk. If you would invest  8,707  in Direxion Monthly Nasdaq 100 on October 21, 2024 and sell it today you would earn a total of  703.00  from holding Direxion Monthly Nasdaq 100 or generate 8.07% return on investment over 90 days.

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

Direxion Monthly Nasdaq 100  vs.  Sit Mid Cap

Direxion Monthly Nasdaq

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Monthly Nasdaq 100 are ranked lower than 5 (%) 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 February 2025.

Sit Mid Cap

Risk-Adjusted Performance

3 of 100

Weak

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

Pair Trading with Direxion Monthly and Sit Mid

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

The idea behind Direxion Monthly Nasdaq 100 and Sit Mid Cap 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.