Correlation Between Direxion Daily and Fidelity Momentum

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

Diversification Opportunities for Direxion Daily and Fidelity Momentum

0.23

Correlation Coefficient

Direxion Daily  Fidelity Momentum

Modest diversification

The 3 months correlation between Direxion and Fidelity is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and Fidelity Momentum Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Momentum Factor 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 Fidelity Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Momentum Factor has no effect on the direction of Direxion Daily i.e., Direxion Daily and Fidelity Momentum go up and down completely randomly.

Pair Corralation between Direxion Daily and Fidelity Momentum

Given the investment horizon of 90 days Direxion Daily NVDA is expected to generate 5.96 times more return on investment than Fidelity Momentum. However, Direxion Daily is 5.96 times more volatile than Fidelity Momentum Factor. It trades about 0.01 of its potential returns per unit of risk. Fidelity Momentum Factor is currently generating about -0.23 per unit of risk. If you would invest  6,534  in Direxion Daily NVDA on December 5, 2024 and sell it today you would lose (250.00) from holding Direxion Daily NVDA or give up 3.83% of portfolio value over 90 days.

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

Direxion Daily NVDA  vs.  Fidelity Momentum Factor

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.

Fidelity Momentum Factor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity Momentum Factor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Direxion Daily and Fidelity Momentum

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

The idea behind Direxion Daily NVDA and Fidelity Momentum Factor 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.