Correlation Between IShares Core and Direxion NASDAQ

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

By analyzing existing cross correlation between iShares Core SP and Direxion NASDAQ 100 Equal, you can compare the effects of market volatilities on IShares Core and Direxion NASDAQ 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 IShares Core with a short position of Direxion NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Direxion NASDAQ.

Diversification Opportunities for IShares Core and Direxion NASDAQ

0.56

Correlation Coefficient

IShares Core  Direxion NASDAQ

Very weak diversification

The 3 months correlation between IShares and Direxion is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Direxion NASDAQ 100 Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion NASDAQ 100 and IShares Core 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 iShares Core SP are associated (or correlated) with Direxion NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion NASDAQ 100 has no effect on the direction of IShares Core i.e., IShares Core and Direxion NASDAQ go up and down completely randomly.

Pair Corralation between IShares Core and Direxion NASDAQ

Given the investment horizon of 90 days iShares Core SP is expected to generate 1.24 times more return on investment than Direxion NASDAQ. However, IShares Core is 1.24 times more volatile than Direxion NASDAQ 100 Equal. It trades about -0.01 of its potential returns per unit of risk. Direxion NASDAQ 100 Equal is currently generating about -0.04 per unit of risk. If you would invest  13,994  in iShares Core SP on December 1, 2024 and sell it today you would lose (139.00) from holding iShares Core SP or give up 0.99% of portfolio value over 90 days.

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

iShares Core SP  vs.  Direxion NASDAQ 100 Equal

iShares Core SP

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares Core is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Direxion NASDAQ 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion NASDAQ 100 Equal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Direxion NASDAQ is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Core and Direxion NASDAQ

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

The idea behind iShares Core SP and Direxion NASDAQ 100 Equal 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.