Correlation Between Defiance Next and Direxion

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

By analyzing existing cross correlation between Defiance Next Gen and Direxion, you can compare the effects of market volatilities on Defiance Next and Direxion 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 Defiance Next with a short position of Direxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defiance Next and Direxion.

Diversification Opportunities for Defiance Next and Direxion

-0.01

Correlation Coefficient

Defiance Next  Direxion

Good diversification

The 3 months correlation between Defiance and Direxion is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Defiance Next Gen and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion and Defiance Next 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 Defiance Next Gen are associated (or correlated) with Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of Defiance Next i.e., Defiance Next and Direxion go up and down completely randomly.

Pair Corralation between Defiance Next and Direxion

Given the investment horizon of 90 days Defiance Next Gen is expected to under-perform the Direxion. In addition to that, Defiance Next is 1.21 times more volatile than Direxion. It trades about -0.06 of its total potential returns per unit of risk. Direxion is currently generating about -0.03 per unit of volatility. If you would invest  1,439  in Direxion on September 3, 2024 and sell it today you would lose (359.00) from holding Direxion or give up 24.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	81.21%
Values	Daily Returns

Defiance Next Gen  vs.  Direxion

Defiance Next Gen

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance Next Gen are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Defiance Next may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Direxion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Direxion is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Defiance Next and Direxion

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

The idea behind Defiance Next Gen and Direxion 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.