Correlation Between Direxion Daily and IQ MacKay

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

Diversification Opportunities for Direxion Daily and IQ MacKay

-0.49

Correlation Coefficient

Direxion Daily  IQ MacKay

Very good diversification

The 3 months correlation between Direxion and MMIN is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and IQ MacKay Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQ MacKay Municipal 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 IQ MacKay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQ MacKay Municipal has no effect on the direction of Direxion Daily i.e., Direxion Daily and IQ MacKay go up and down completely randomly.

Pair Corralation between Direxion Daily and IQ MacKay

Given the investment horizon of 90 days Direxion Daily NVDA is expected to generate 14.51 times more return on investment than IQ MacKay. However, Direxion Daily is 14.51 times more volatile than IQ MacKay Municipal. It trades about 0.09 of its potential returns per unit of risk. IQ MacKay Municipal is currently generating about 0.04 per unit of risk. If you would invest  9,072  in Direxion Daily NVDA on September 13, 2024 and sell it today you would earn a total of  1,928  from holding Direxion Daily NVDA or generate 21.25% 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 NVDA  vs.  IQ MacKay Municipal

Direxion Daily NVDA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily NVDA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

IQ MacKay Municipal

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IQ MacKay Municipal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, IQ MacKay is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Direxion Daily and IQ MacKay

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

The idea behind Direxion Daily NVDA and IQ MacKay Municipal 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.