Correlation Between Direxion Monthly and Ridgeworth Ceredex

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

Diversification Opportunities for Direxion Monthly and Ridgeworth Ceredex

0.9

Correlation Coefficient

Direxion Monthly  Ridgeworth Ceredex

Almost no diversification

The 3 months correlation between DIREXION and Ridgeworth is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Monthly Nasdaq 100 and Ridgeworth Ceredex Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ridgeworth Ceredex 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 Ridgeworth Ceredex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ridgeworth Ceredex Large has no effect on the direction of Direxion Monthly i.e., Direxion Monthly and Ridgeworth Ceredex go up and down completely randomly.

Pair Corralation between Direxion Monthly and Ridgeworth Ceredex

Assuming the 90 days horizon Direxion Monthly Nasdaq 100 is expected to generate 2.34 times more return on investment than Ridgeworth Ceredex. However, Direxion Monthly is 2.34 times more volatile than Ridgeworth Ceredex Large. It trades about 0.15 of its potential returns per unit of risk. Ridgeworth Ceredex Large is currently generating about 0.17 per unit of risk. If you would invest  7,808  in Direxion Monthly Nasdaq 100 on September 2, 2024 and sell it today you would earn a total of  1,361  from holding Direxion Monthly Nasdaq 100 or generate 17.43% return on investment 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.  Ridgeworth Ceredex Large

Direxion Monthly Nasdaq

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Monthly Nasdaq 100 are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Direxion Monthly showed solid returns over the last few months and may actually be approaching a breakup point.

Ridgeworth Ceredex Large

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ridgeworth Ceredex Large are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ridgeworth Ceredex may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Direxion Monthly and Ridgeworth Ceredex

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

The idea behind Direxion Monthly Nasdaq 100 and Ridgeworth Ceredex Large 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.