Correlation Between Direxion Daily and Western Asset

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

Diversification Opportunities for Direxion Daily and Western Asset

-0.81

Correlation Coefficient

Direxion Daily  Western Asset

Pay attention - limited upside

The 3 months correlation between Direxion and Western is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Direxion Daily NVDA and Western Asset Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Total 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Total has no effect on the direction of Direxion Daily i.e., Direxion Daily and Western Asset go up and down completely randomly.

Pair Corralation between Direxion Daily and Western Asset

Given the investment horizon of 90 days Direxion Daily NVDA is expected to under-perform the Western Asset. In addition to that, Direxion Daily is 25.81 times more volatile than Western Asset Total. It trades about -0.07 of its total potential returns per unit of risk. Western Asset Total is currently generating about 0.15 per unit of volatility. If you would invest  1,946  in Western Asset Total on December 29, 2024 and sell it today you would earn a total of  59.00  from holding Western Asset Total or generate 3.03% return on investment over 90 days.

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

Direxion Daily NVDA  vs.  Western Asset Total

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.

Western Asset Total

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Total are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Western Asset 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 Western Asset

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

The idea behind Direxion Daily NVDA and Western Asset Total 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.