Correlation Between Direxion Monthly and Alphacentric Lifesci

Can any of the company-specific risk be diversified away by investing in both Direxion Monthly and Alphacentric Lifesci 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 Alphacentric Lifesci into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Direxion Monthly Sp and Alphacentric Lifesci Healthcare, you can compare the effects of market volatilities on Direxion Monthly and Alphacentric Lifesci 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 Alphacentric Lifesci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Monthly and Alphacentric Lifesci.

Diversification Opportunities for Direxion Monthly and Alphacentric Lifesci

0.59

Correlation Coefficient

Direxion Monthly  Alphacentric Lifesci

Very weak diversification

The 3 months correlation between Direxion and Alphacentric is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Monthly Sp and Alphacentric Lifesci Healthcar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphacentric Lifesci 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 Sp are associated (or correlated) with Alphacentric Lifesci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphacentric Lifesci has no effect on the direction of Direxion Monthly i.e., Direxion Monthly and Alphacentric Lifesci go up and down completely randomly.

Pair Corralation between Direxion Monthly and Alphacentric Lifesci

Assuming the 90 days horizon Direxion Monthly Sp is expected to generate 1.24 times more return on investment than Alphacentric Lifesci. However, Direxion Monthly is 1.24 times more volatile than Alphacentric Lifesci Healthcare. It trades about 0.08 of its potential returns per unit of risk. Alphacentric Lifesci Healthcare is currently generating about -0.02 per unit of risk. If you would invest  4,057  in Direxion Monthly Sp on October 4, 2024 and sell it today you would earn a total of  2,601  from holding Direxion Monthly Sp or generate 64.11% return on investment over 90 days.

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

Direxion Monthly Sp  vs.  Alphacentric Lifesci Healthcar

Direxion Monthly

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Monthly Sp has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Direxion Monthly is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alphacentric Lifesci

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alphacentric Lifesci Healthcare has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Direxion Monthly and Alphacentric Lifesci

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

The idea behind Direxion Monthly Sp and Alphacentric Lifesci Healthcare 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.