Correlation Between Direxion Daily and Northern Emerging

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

Diversification Opportunities for Direxion Daily and Northern Emerging

-0.53

Correlation Coefficient

Direxion Daily  Northern Emerging

Excellent diversification

The 3 months correlation between Direxion and Northern is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily Mid and Northern Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Emerging Markets 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 Northern Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Emerging Markets has no effect on the direction of Direxion Daily i.e., Direxion Daily and Northern Emerging go up and down completely randomly.

Pair Corralation between Direxion Daily and Northern Emerging

Given the investment horizon of 90 days Direxion Daily Mid is expected to under-perform the Northern Emerging. In addition to that, Direxion Daily is 3.45 times more volatile than Northern Emerging Markets. It trades about -0.1 of its total potential returns per unit of risk. Northern Emerging Markets is currently generating about 0.08 per unit of volatility. If you would invest  1,115  in Northern Emerging Markets on December 30, 2024 and sell it today you would earn a total of  49.00  from holding Northern Emerging Markets or generate 4.39% return on investment over 90 days.

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

Direxion Daily Mid  vs.  Northern Emerging Markets

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.

Northern Emerging Markets

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Emerging Markets are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Northern Emerging 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 Northern Emerging

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

The idea behind Direxion Daily Mid and Northern Emerging Markets 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.