Correlation Between Direxion Daily and Bank of Montreal

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

Diversification Opportunities for Direxion Daily and Bank of Montreal

0.4

Correlation Coefficient

Direxion Daily  Bank of Montreal

Very weak diversification

The 3 months correlation between Direxion and Bank is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and Bank of Montreal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Montreal 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 Bank of Montreal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Montreal has no effect on the direction of Direxion Daily i.e., Direxion Daily and Bank of Montreal go up and down completely randomly.

Pair Corralation between Direxion Daily and Bank of Montreal

Given the investment horizon of 90 days Direxion Daily NVDA is expected to under-perform the Bank of Montreal. In addition to that, Direxion Daily is 2.43 times more volatile than Bank of Montreal. It trades about -0.03 of its total potential returns per unit of risk. Bank of Montreal is currently generating about 0.02 per unit of volatility. If you would invest  1,222  in Bank of Montreal on November 28, 2024 and sell it today you would earn a total of  7.00  from holding Bank of Montreal or generate 0.57% return on investment over 90 days.

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

Direxion Daily NVDA  vs.  Bank of Montreal

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 March 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Bank of Montreal

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Montreal are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Bank of Montreal is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Direxion Daily and Bank of Montreal

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

The idea behind Direxion Daily NVDA and Bank of Montreal 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.