Correlation Between Vanguard Russell and Direxion NASDAQ

Can any of the company-specific risk be diversified away by investing in both Vanguard Russell 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 Vanguard Russell and Direxion NASDAQ into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Russell 1000 and Direxion NASDAQ 100 Equal, you can compare the effects of market volatilities on Vanguard Russell 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 Vanguard Russell with a short position of Direxion NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Russell and Direxion NASDAQ.

Diversification Opportunities for Vanguard Russell and Direxion NASDAQ

0.97

Correlation Coefficient

Vanguard Russell  Direxion NASDAQ

Almost no diversification

The 3 months correlation between Vanguard and Direxion is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Russell 1000 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 Vanguard Russell 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 Vanguard Russell 1000 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 Vanguard Russell i.e., Vanguard Russell and Direxion NASDAQ go up and down completely randomly.

Pair Corralation between Vanguard Russell and Direxion NASDAQ

Given the investment horizon of 90 days Vanguard Russell 1000 is expected to generate 1.12 times more return on investment than Direxion NASDAQ. However, Vanguard Russell is 1.12 times more volatile than Direxion NASDAQ 100 Equal. It trades about 0.19 of its potential returns per unit of risk. Direxion NASDAQ 100 Equal is currently generating about 0.15 per unit of risk. If you would invest  9,124  in Vanguard Russell 1000 on September 3, 2024 and sell it today you would earn a total of  1,133  from holding Vanguard Russell 1000 or generate 12.42% return on investment over 90 days.

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

Vanguard Russell 1000  vs.  Direxion NASDAQ 100 Equal

Vanguard Russell 1000

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Russell 1000 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vanguard Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Direxion NASDAQ 100

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion NASDAQ 100 Equal are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Direxion NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Russell and Direxion NASDAQ

The main advantage of trading using opposite Vanguard Russell and Direxion NASDAQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Russell 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 Vanguard Russell 1000 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.