Correlation Between Direxion Daily and Quadratic Deflation

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

By analyzing existing cross correlation between Direxion Daily NVDA and Quadratic Deflation ETF, you can compare the effects of market volatilities on Direxion Daily and Quadratic Deflation 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 Quadratic Deflation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Direxion Daily and Quadratic Deflation.

Diversification Opportunities for Direxion Daily and Quadratic Deflation

-0.15

Correlation Coefficient

Direxion Daily  Quadratic Deflation

Good diversification

The 3 months correlation between Direxion and Quadratic is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and Quadratic Deflation ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quadratic Deflation ETF 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 NVDA are associated (or correlated) with Quadratic Deflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quadratic Deflation ETF has no effect on the direction of Direxion Daily i.e., Direxion Daily and Quadratic Deflation go up and down completely randomly.

Pair Corralation between Direxion Daily and Quadratic Deflation

Given the investment horizon of 90 days Direxion Daily NVDA is expected to under-perform the Quadratic Deflation. In addition to that, Direxion Daily is 12.5 times more volatile than Quadratic Deflation ETF. It trades about -0.07 of its total potential returns per unit of risk. Quadratic Deflation ETF is currently generating about -0.03 per unit of volatility. If you would invest  1,344  in Quadratic Deflation ETF on December 30, 2024 and sell it today you would lose (20.00) from holding Quadratic Deflation ETF or give up 1.49% of portfolio value over 90 days.

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

Direxion Daily NVDA  vs.  Quadratic Deflation ETF

Direxion Daily NVDA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily NVDA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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.

Quadratic Deflation ETF

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Direxion Daily and Quadratic Deflation

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

The idea behind Direxion Daily NVDA and Quadratic Deflation ETF 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.