Correlation Between Direxion Monthly and Nasdaq-100(r)

Can any of the company-specific risk be diversified away by investing in both Direxion Monthly and Nasdaq-100(r) 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 Nasdaq-100(r) 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 Nasdaq 100 2x Strategy, you can compare the effects of market volatilities on Direxion Monthly and Nasdaq-100(r) 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 Nasdaq-100(r). Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Monthly and Nasdaq-100(r).

Diversification Opportunities for Direxion Monthly and Nasdaq-100(r)

1.0

Correlation Coefficient

Direxion Monthly  Nasdaq-100(r)

No risk reduction

The 3 months correlation between Direxion and Nasdaq-100(r) is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Monthly Nasdaq 100 and Nasdaq 100 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 2x 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 Nasdaq-100(r). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 2x has no effect on the direction of Direxion Monthly i.e., Direxion Monthly and Nasdaq-100(r) go up and down completely randomly.

Pair Corralation between Direxion Monthly and Nasdaq-100(r)

Assuming the 90 days horizon Direxion Monthly Nasdaq 100 is expected to generate 0.88 times more return on investment than Nasdaq-100(r). However, Direxion Monthly Nasdaq 100 is 1.13 times less risky than Nasdaq-100(r). It trades about -0.1 of its potential returns per unit of risk. Nasdaq 100 2x Strategy is currently generating about -0.11 per unit of risk. If you would invest  9,491  in Direxion Monthly Nasdaq 100 on December 22, 2024 and sell it today you would lose (1,424) from holding Direxion Monthly Nasdaq 100 or give up 15.0% of portfolio value over 90 days.

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

Direxion Monthly Nasdaq 100  vs.  Nasdaq 100 2x Strategy

Direxion Monthly Nasdaq

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Monthly Nasdaq 100 has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Nasdaq 100 2x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 2x Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Direxion Monthly and Nasdaq-100(r)

The main advantage of trading using opposite Direxion Monthly and Nasdaq-100(r) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Direxion Monthly position performs unexpectedly, Nasdaq-100(r) 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 Nasdaq-100(r) will offset losses from the drop in Nasdaq-100(r)'s long position.

The idea behind Direxion Monthly Nasdaq 100 and Nasdaq 100 2x Strategy 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.