Correlation Between First Trust and Direxion NASDAQ

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both First Trust and Direxion NASDAQ 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 First Trust and Direxion NASDAQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust NASDAQ 100 and Direxion NASDAQ 100 Equal, you can compare the effects of market volatilities on First Trust and Direxion NASDAQ 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 First Trust with a short position of Direxion NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Direxion NASDAQ.

Diversification Opportunities for First Trust and Direxion NASDAQ

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between First and Direxion is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NASDAQ 100 and Direxion NASDAQ 100 Equal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion NASDAQ 100 and First Trust 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 First Trust NASDAQ 100 are associated (or correlated) with Direxion NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion NASDAQ 100 has no effect on the direction of First Trust i.e., First Trust and Direxion NASDAQ go up and down completely randomly.

Pair Corralation between First Trust and Direxion NASDAQ

Given the investment horizon of 90 days First Trust NASDAQ 100 is expected to generate 0.74 times more return on investment than Direxion NASDAQ. However, First Trust NASDAQ 100 is 1.35 times less risky than Direxion NASDAQ. It trades about -0.01 of its potential returns per unit of risk. Direxion NASDAQ 100 Equal is currently generating about -0.04 per unit of risk. If you would invest  9,857  in First Trust NASDAQ 100 on December 2, 2024 and sell it today you would lose (47.00) from holding First Trust NASDAQ 100 or give up 0.48% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

First Trust NASDAQ 100  vs.  Direxion NASDAQ 100 Equal

 Performance 
       Timeline  
First Trust NASDAQ 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days First Trust NASDAQ 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, First Trust is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Direxion NASDAQ 100 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Direxion NASDAQ 100 Equal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Direxion NASDAQ is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust and Direxion NASDAQ Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Trust and Direxion NASDAQ

The main advantage of trading using opposite First Trust and Direxion NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Direxion NASDAQ 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 Direxion NASDAQ will offset losses from the drop in Direxion NASDAQ's long position.
The idea behind First Trust NASDAQ 100 and Direxion NASDAQ 100 Equal 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.
Check out your portfolio center.
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

Other Complementary Tools

Investing Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Sign In To Macroaxis
Sign in to explore Macroaxis' wealth optimization platform and fintech modules
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Transaction History
View history of all your transactions and understand their impact on performance