Correlation Between Direxion Monthly and Ultra Nasdaq-100

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

Diversification Opportunities for Direxion Monthly and Ultra Nasdaq-100

1.0

Correlation Coefficient

Direxion Monthly  Ultra Nasdaq-100

No risk reduction

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

Pair Corralation between Direxion Monthly and Ultra Nasdaq-100

Assuming the 90 days horizon Direxion Monthly Nasdaq 100 is expected to generate 0.89 times more return on investment than Ultra Nasdaq-100. However, Direxion Monthly Nasdaq 100 is 1.13 times less risky than Ultra Nasdaq-100. It trades about -0.11 of its potential returns per unit of risk. Ultra Nasdaq 100 Profunds is currently generating about -0.11 per unit of risk. If you would invest  9,251  in Direxion Monthly Nasdaq 100 on December 30, 2024 and sell it today you would lose (1,543) from holding Direxion Monthly Nasdaq 100 or give up 16.68% 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.  Ultra Nasdaq 100 Profunds

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.

Ultra Nasdaq 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultra Nasdaq 100 Profunds 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 forward 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 Ultra Nasdaq-100

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

The idea behind Direxion Monthly Nasdaq 100 and Ultra Nasdaq 100 Profunds 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.