Correlation Between Direxion Daily and Innovator Growth

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

Diversification Opportunities for Direxion Daily and Innovator Growth

-0.22

Correlation Coefficient

Direxion Daily  Innovator Growth

Very good diversification

The 3 months correlation between Direxion and Innovator is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and Innovator Growth Accelerated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Growth Acc 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 Innovator Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Growth Acc has no effect on the direction of Direxion Daily i.e., Direxion Daily and Innovator Growth go up and down completely randomly.

Pair Corralation between Direxion Daily and Innovator Growth

Given the investment horizon of 90 days Direxion Daily NVDA is expected to under-perform the Innovator Growth. In addition to that, Direxion Daily is 6.41 times more volatile than Innovator Growth Accelerated. It trades about -0.03 of its total potential returns per unit of risk. Innovator Growth Accelerated is currently generating about 0.12 per unit of volatility. If you would invest  3,140  in Innovator Growth Accelerated on October 20, 2024 and sell it today you would earn a total of  170.50  from holding Innovator Growth Accelerated or generate 5.43% return on investment over 90 days.

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

Direxion Daily NVDA  vs.  Innovator Growth Accelerated

Direxion Daily NVDA

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Etf's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Innovator Growth Acc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Growth Accelerated are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking indicators, Innovator Growth is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Direxion Daily and Innovator Growth

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

The idea behind Direxion Daily NVDA and Innovator Growth Accelerated 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.