Correlation Between Direxion Daily and Nuance Mid

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

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

Diversification Opportunities for Direxion Daily and Nuance Mid

0.87

Correlation Coefficient

Direxion Daily  Nuance Mid

Very poor diversification

The 3 months correlation between Direxion and Nuance is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Nuance Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuance Mid Cap and Direxion Daily 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 Daily Mid are associated (or correlated) with Nuance Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuance Mid Cap has no effect on the direction of Direxion Daily i.e., Direxion Daily and Nuance Mid go up and down completely randomly.

Pair Corralation between Direxion Daily and Nuance Mid

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Nuance Mid. In addition to that, Direxion Daily is 3.59 times more volatile than Nuance Mid Cap. It trades about -0.11 of its total potential returns per unit of risk. Nuance Mid Cap is currently generating about -0.1 per unit of volatility. If you would invest  1,229  in Nuance Mid Cap on December 29, 2024 and sell it today you would lose (71.00) from holding Nuance Mid Cap or give up 5.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Direxion Daily Mid  vs.  Nuance Mid Cap

Direxion Daily Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily Mid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Etf's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Nuance Mid Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Direxion Daily and Nuance Mid

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

The idea behind Direxion Daily Mid and Nuance Mid Cap 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.